October 31, 2001

Financial analysts seem to agree that until now we have not taken terrorism very seriously. The implication is that terrorism was a risk that had not been previously priced in the market place. While it’s clear that terrorism will have a negative impact on the financial markets, the more central concern is, once we take account of the “new” risk premium, can the financial markets ever get back to their old valuation levels. The answer to that depends on the level of success and duration of our war against terrorism.

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