What effects will the terrorist attack have on Wall Street and trading in general in the long term? First of all I think that interest of general population for stocks and stock market in general will substantionally decrease as people will realize how vulnerable and easy to disrupt our economy really is. There will be less liquidity, but on the other hand volatility may even increase. If there is a prolonged conflict with Afganistan and other similar countries (it is very likely scenario), overnight and long term holding of positions will be definitely less appealing for most traders. On the other hand, more people will be inclined for making short term profits as opposed to long term investing, so speculation and trading may get to the new level. Wall Street and Manhattan will start to lose their appeal as more people will realize how dangerous it is to have as centralized financial system as we do now. Markets will become decentralized more redundant and much harder to disrupt.
means end of centralised exchanges. Painful as it is, wall street has been losing control. Centralised control of US economy such as Wall Street is strategically and for practical consideration a 'achiles heel'. It won't happen overnight but nasdaq, bruised and at 1600 now means the future.
Good points, michaelday. Popular interest in the market has shrunk dramatically with the advent of this bear; liquidity has been a problem in typical summer fashion but was beginning to pick up; volatility is part of the initial fall, in shock, as mass uncertainty sets in after national security is threatened (see rtarp's posting http://oxfordclub.com/PDFs/srx_report.pdf). The key is when the resolution of the uncertainty appears imminent e.g. Bin Laden killed or captured, then we can go back to the market as it was on 9/10/01-if we can ever go back to that world. I believe we have to opt for a decentralized market which our technology has made eminently feasible.
I don't think the "phsyical" market is the problem. Recovering from the physical disruption will take a few days or weeks but the "psychic" damage could take years to repair The loss of confidence is not in the mechanics of the market but in the future.
In the case of skyscrapers as a place of conducting business, the psychic and the physical are entertwined. The concentric city with its centerpiece, the skyscraper, is a monument to mans' vanity and folly. Too bad we opted to go up rather than out. The linear city (see www.linearcity.com) is a far more sensible (and safe, as it turns out) mode of urban living. Perhaps its not too late.
rarely do I ever call one's postulations irrational, except in this thread/case. we already have highly decentralized markets. many trades are "done away" and simply reported on the tape for crossing means and not matching means. we already have highly decentralized trading, as many of us sophisticated traders maintain laptops, cell phones, pda's and other "E" devices that are capable of entering trades, maintaining positions and reporting upon P&L. This includes even the old technology dial telephone to call a broker to handle the same. whether or not there needs to be an actual physical exchange in NYC, Chicago, Phlx, SFO or other places (Bos, St. Louis, etc.) is moot. These places are going to remain as bastions and symbols, even if their internal functions are transplanted into cyberspace, such as the NASDAQ or E-Mini markets. whether or not short term/mid-term fundamentals causes the average fickle investor to pull in their bull-horns and put on bear-ears during this horrendous downturn has absolutely no impact upon the next bull market. Recall that all those who lived through the depression of 87-89, 91-94 and 00-01 will be ready to pile back in once the train whistle announces the departure of the next bull. scare talk is just like being flatulent, at some time, that gas has to come out.
i agree with michaelday and andrasnm: financial center(s) must become decentralized. i would extend that idea to political centers (ie Washington) compared to a couple jets - a nuke, chemical, or biological attack could cause much greater disruption. even in this particular case, the damage might have been much greater had the towers simply fallen laterally the world is indeed getting smaller: we are no longer isolated by the Atlantic and the Pacific