Katrina's Impact On The Economy

Q. What is your feeling about the impact that hurricane katrina will have on the US economy in the short term and long term?

Is there anything investment wise that we should be watching for during this period? Will there really be an oil shortage as some have speculated or is it a ploy to raise the prices even higher so the oil companies may profit? If prices increase anymore it has to have a very negative impact on the economy. What then?

Thanks for your comments.

A. Katrina will have a negative short-term impact on the GDP for the third and fourth quarter of 2005. This impact is expected to be as much as a 1/2% in the 4th quarter.

As the rebuilding starts, though, Katrina will positively affect the economy in significant ways. Massive amounts of money are going to be spent to rebuild the entire coastal area. That money is going to continue to fuel the US economy and should raise GDP for 2006.

I feel this will be positive for the stock market and is the reason you didn't see huge losses last week. The market looks 6 months ahead and realizes the positive this impact will have.

I don't think there is a ploy by the energy companies. It is a refinery problem. Hopefully, this situation will be used to spur the construction of additional refineries. That would go a long way in correcting the gasoline situation long-term.

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