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The Best of <I>RealMoney</I> Calls a Recession Into Session

Terrorism, however, wasn't the cause. With Anirvan Banerji, airborn intrigue and Carly's lament.

Undeniably, the Sept. 11 terrorist attacks on the World Trade Center caused unthinkable misery, unimaginable carnage and immeasurable grief. They did not, however, cause a recession.

So says Anirvan Banerji, director of research for the Economic Cycle Research Institute, or ECRI. A contributor to

, Banerji first

warned readers about a coming recession a year ago and

predicted one six months ago.

And this week, in

Don't Blame the Terrorists for This Recession, Banerji took umbrage at commentators for inadvertently crediting terrorism for tipping the economy into a recession.

Banerji says modern business-cycle analysis indicates that the economy was undoubtedly in a recession, and that the attacks will simply serve to worsen it.

In fact, according to indices produced by the ECRI, the attacks have wiped out the possibility of a year-end recovery, and the end of the recession is no longer in sight.

The good news, according to Banerji, is that the last time the U.S. mainland was invaded -- by the British in June 1812 -- the result was one of the shortest recessions on record. The following year, the economy had rebounded and prosperity had returned.

Airlines Intrigue

In Alarm Bells: Unusual Options Activity in the Airlines, Howard Simons lays out the intriguing possibility that the perpetrators may have benefited by short-selling options on stocks in the days preceding the Sept. 11 attacks.

According to Simons, there was unusual activity in the options of United Airlines' parent company


(UAL) - Get United Airlines Holdings Inc. Report

and American Airlines' parent

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. Put simply, an unusually heavy bet was placed that those stocks were headed for a fall.

In addition, Simons said evidence exists that the somebody was shorting


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, insurers such as


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(C) - Get Citigroup Inc. Report

, and hotel companies such as


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Tickets Available, Jim Griffin eloquently summarized the sentiment -- and market action -- in the first week Wall Street reopened following the attacks.

Wrote Griffin: "New York hotel rooms are going begging and you can get seats now to Broadway shows that previously had had none available until next year. Rationing is done on Broadway by queue: When demand exceeds supply, get in line. That's not how it is done on Wall Street: When demand exceeds supply, you boost the bid. ... There can't be much doubt about what has happened to demand: It has pulled back in a galvanic, shocked response.

"This creates an opportunity for people who want some of these 'tickets,' on Wall Street as on Broadway. They are much more easily available now, to those willing to accept the risks, from those who prefer to give up their places in line."

As a warning to investors, Griffin concluded by saying, "When the grieving eases, there will be lines again on Broadway, and it won't be easy to get tickets to Wall Street, either."

Eavis, Leave Us Alone ...

Last November, Peter Eavis predicted the

Nasdaq Composite Index

would hit 1500, a drop of more than 40%. At the time, many investors -- and even a few colleagues -- suggested he had lost his crumpets. Now, with the Nasdaq at less than 1500, Eavis is predicting a drop of

another 25%.


The Rout Is Far From Over for Tech Stocks, the bad-news Brit said that, thanks to war and a number of other factors, the outlook for stocks is bleaker than ever and that the Nasdaq is likely to retreat to levels it hasn't seen since 1996.

In short, Eavis said the market will be strafed as a result of "nosebleed valuations, a profligate monetary policy, higher government spending and infighting in the executive branch."

Other than that, everything will be fine.

Does Not Compute


H-P-Compaq Merger Smells Like It's Over, Jim Seymour wrote that he didn't believe the giant personal-computer companies were going to merge. According to Seymour, the value of the deal has fallen from $25 billion to $17 billion, and both parties are looking for a way to back out of it.

That viewpoint was reason for consternation on the part of a few gung-ho investors, who called

this week to inquire about Seymour's sources, if not his sanity.

Nevertheless, Seymour wrote that he suspects we'll soon see a conference call in which



CEO Carly Fiorina and



CEO Mike Capellas will say they don't believe the timing is right for the deal.

Furthermore, Seymour said he expects that Fiorina will likely pay for the deal (and her company's falling share price) with her job.