To judge from investor reactions yesterday and, so far, today, you'd think that the future of travel and lodging in America is now over. Kaput. Finis.
That's the implication of yesterday's knee-jerk reactions by investors as they drove the major indices higher, but savaged energy and hospitality stocks.
My question is, if this is investor sentiment after a successful foiling of a massive terror attempt, what would it be like after a successful act of terror? My portfolio fell more than 1% yesterday, as investors apparently believe that energy, particularly oil, is now going to be plentiful for the forseeable future.
In truth, the longer-term realities of the world are still the same. These are now common risks in the larger world. As one piece in yesterday's Wall Street Journal put it, people are beginning to view terrorism like natural disasters- they don't know when an attack may occur, but they realize the chances of one are non-zero.
If investors are waiting for "the end" of the war on terrorism, then we may have 20 years of a sideways or bear market. The reality is that global commerce will continue, there will be demand for commodities as China and India grow, and terrorism will become part of the political-economic landscape for a while.
As David Dreman, a well-known institutional investor was reported to have said yesterday, 25 cancelled flights won't have much effect on world demand for jet fuel.
While possible, I doubt that the world will retreat into a a modern "Dark Age" because of Muslim fanatics and their terrorism.
Thus, if anything, this week is probably a buying opportunity for energy and hospitality equities.
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