Two Tough Broads

First, Katrina rolled in and did phenomenal damage
in Miss. and Louisiana. Now Rita is humming through the
Gulf, building strength as it is nurtured by the warm waters.
It reached Cat. 4 quickly and could easily attain Cat.5.
The tightening of the storm's bands and rapid build up in
wind speed now suggest a smaller but more concentrated and
powerful storm than Katrina.

If it makes landfall in Texas as a Cat. 4 or 5, it will
do tremendous economic damage, particularly in coastal
and nearby residential areas. It is too early yet to tell
whether the storm will pass close enough to the Houston
Channel to damage up to 1 million bd. of potentially
exposed oil refining capacity. The storm needs to make
a Northward turn first before specific target areas
can be singled out.

If the storm stays strong and slams coastal Texas, the
resultant damage, coupled with the destruction wrought by
Katrina, could well throw economic policy into a cocked
hat, as legislators and the Fed struggle to come to grips
with a suitable reconstruction plan.

Rita, unlike Katrina, has the President's attention and
you can bet that Rita's damagees would have considerable
clout with GWB.

Traders are looking for an opening to grab a rally
along the lines of "sell the rumor (Rita's spectre), and
buy the fact (Rita's arrival)". Not my cup of tea unless
Rita somehow weakens and or misses the US.

I plan to see just what this broad winds up doing before
I take a serious look.