Technically Speaking: Electronic billing companies to prosper from the anthrax scare

Friday 19th October 2001

The world war waged by the US is starting to reshape economies aside from restructuring Afghanistan from the air. A number of forces are in operation that will have conflicting and far-reaching influence.

On the positive side, the US is trying desperately to reflate its economy, which at some stage should show an effect on the fortunes of other economies and financial markets. A combination of low interest rates and massive fiscal stimulus of at least $US150 billion, or 1.5% of US GDP, should see the American economy pick up in the second quarter of 2002, according to GAM (Global Asset Management) hedge fund manager Bruce Kovner of Caxton Associates.

Another GAM hedge fund manager, Daniel Gressel, of Teleos Management, is more bearish than Mr Kovner, forecasting that the US recession will deepen as the savings rate increases on low consumer confidence and will spread to Europe as well as worsening Japan's existing recession. He tips that at present it is best to take a buying stance on shorter-term interest-earning investments, and to sell the US dollar against European currencies. After this period, he predicts, exposure should be shifted to medium-term fixed interest and eventually back to shares. But as he wryly notes, "these trades are for another month."

Several contingent impacts of the anti-terrorist campaign have emerged. Western tourists and expatriates in Muslim countries that might be engulfed in the struggle stand to suffer, with resulting economic contagion. German tourists have been attacked in Indonesia by a mob that mistook them for Americans. In the Middle East a Canadian aviation worker has been murdered in a crime allegedly linked to Osama bin Laden's al Qaeda movement.

A collapse in tourism will hurt the foreign exchange earnings of many countries in Asia and the Middle East that were already battling the downturn radiating out of America. Perhaps worse, many Caucasians working abroad must now be wondering whether it is better to return home. Considering how dependent many countries are on ex-expatriates to run their economies, a stampede back to countries of origin threatens to cause severe disruption to world trade and markets.

Developing economies would be gutted and First World countries glutted with skilled workers undertaking mass exodus from perceived high-risk zones. Osama bin Laden may not bring down the economies of the US and the UK as he reportedly has vowed to do, but he could effect a devastating hatchet job on those countries which import citizens of those nations into the workforce. Islamisation by infidel evacuation would be the result, which no doubt would suit his purposes.

The anthrax scare that has broken out could have effects similar to the panic caused by BSE and foot-and-mouth disease in livestock. In the US, rising fear and hysteria over terrorist threats real and imagined have the potential to trigger and prolong the savings-led recession predicted by Mr Gressel and much earlier by the Economist magazine.

Not all is doom and gloom for investors. Anthrax should prove a boost to pharmaceuticals companies, although release of the disease in a crowded subway, for example, with resulting dissemination to homes and workplaces, would test the production abilities of even the biggest drug firms.

There is some hope for parts of the IT industry as terror spreads. Teleconferencing companies have soared in share price with businesspeople reluctant to travel. Another beneficiary should be the electronic conferencing industry based on the internet.

Electronic billing firms should prosper as people become afraid to open their mail in case it is anthraxed. Even e-tailers, the previously shunned B2C dot.bombs, might have a new lease of life as people prefer to shop over the internet rather than risk disease or explosions in shopping malls. The Nasdaq may yet rise again.

Buried in his cave hideout somewhere in the remote wilds of Afghanistan, Osama has become the leading force in today's markets.

He may yet produce some excellent investment opportunities in the secular capitalist markets he supposedly aims to destroy.

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