Economy braces for Sandy

TEDA banquet offers business advancements
October 30, 2012
Chamber hears storm protection tax pitch
October 30, 2012
TEDA banquet offers business advancements
October 30, 2012
Chamber hears storm protection tax pitch
October 30, 2012

Many Louisianans watched television and the Internet Monday as Hurricane Sandy made landfall on the northeast Atlantic Coast. For those accustomed to keeping track of the weather during hurricane season, monitoring this storm seemed a natural response.

At our worst, some in the Bayou State might only remember these folks in the storm’s path as the same people who have made comments along the line of “They shouldn’t live there” when hurricanes pound Louisiana. Then think in terms of paybacks.

By contrast, many who know all-too-well the seasonal attacks by nature, offer a prayerful thought of safety for an estimated 60 million people impacted by what was “only” a Category 1 storm.

An additional concern for investors came as Wall Street remained closed Monday and Tuesday while today remained in question at press time.

The concern persisted: What impact might a major storm shutting down a global commerce center for at least four days have on the remainder of the nation?

“They are not much above sea level in New York Harbor,” Nicholls State University Economics and Finance Professor John Lajaunie said. “We have levees, they don’t. So, based on what I’ve seen that this thing may do, it could create a nasty mess.”

Lajaunie said estimates of $100 billion in damage from Hurricane Sandy ($10 to $20 billion in New York City alone) translates to asking if Wall Street has the ability to execute trade as the storm pushes over that area. “I don’t know what their fall-back strategy is to get power back so trades could be executed in a timely manner and people have confidence that market numbers are correct,” he said. “That would be my biggest concern.”

Insurance Information Institute Media Relations Vice President Michael Barry said in a telephone interview Monday that much of what business can expect could only be determined following the storm and by estimates from prior experiences.

When Hurricane Irene made its ninth landfall on Aug. 28, 2011 at Brooklyn, N.Y. and pressed on to flood coastal communities into New England, it was categorized as a “near miss.”

“Irene was the 10th costliest hurricane in U.S. History,” Barry said for the storm that made its presence known on the continental United States by traveling from North Carolina to Vermont.

“Private sector claims payouts [for autos, homes and businesses damaged by Irene] were $4.3 billion,” Barry said. “Then you had another $1.279 billion in flood claims with the majority of those payouts coming from the FEMA national insurance program.”

Barry said he could not offer estimates for business interruption coverage that would apply to policy holders in damage areas. It is also unknown how damage to any corporate headquarters in New York might impact branch locations around the nation.

“The only time [business interruption coverage] kicks in is if your storefront is hit directly by the hurricane,” the insurance expert said. “It gets complicated after that. [It] will have to be hashed out later.”

Business losses from Hurricane Isaac during August (also a Category1 storm) have not been finalized for Louisiana, but multiple preliminary calculations for property insurance claims alone reach estimates in excess of $1.5 billion. It is unknown when business interruption might be fully realized.

“We were just talking about that,” Louisiana Oil and Gas Association President Don Briggs said when asked how impact to petroleum shipments at northeastern ports might impact business in coastal Louisiana.

“It is so unusual to have a storm up there,” Briggs said. “It is not like the Gulf of Mexico where you just shut down for a day or two and go to work afterwards. It is interesting to think what might happen with the market and how that impacts us. We can always talk about what happens here, but when it happens up there it is different.”

Edward Jones broker Blake Acuion said it is difficult to know what to expect for Wall Street. “We tend to take a pretty conservative approach,” he said to express that panic would never pay off for investors.

“Within the next couple of weeks you will get actual numbers [for dollar losses from Hurricane Sandy],” Barry said.

The last time Wall Street closed for a storm of this nature was in September 1985 for Hurricane Gloria. That was a Category 4 storm when it hit Long Island.

On Monday afternoon, storm surges of 11-feet from Hurricane Sandy were forecast for New York Harbor. By 2:40 p.m. (central time) CNN reported that 1.7 million people in the northeast were without electric service.

Lajaune said long-term investors should not panic. “If you are a day trader,” he said, “you are going to age a lot during the next week.”