The GDP Surge May Be Shocking

 | Oct 31, 2012 | 11:35 AM EDT
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We all know nothing good that comes from a storm when it comes to real life. The harrowing stories we are hearing just sadden us, and we want to do all we can to help.

At the same time, it is our job to sort through the financial wreckage and make sense of who is coming out ahead and who is behind.

Let me give you some insight, based on previous storms and disasters.

First, the process usually goes like this: You have storm damage, you call the insurance company and you get the work fixed, either with their checks or with checks that come after the work is done. That's a direct cash infusion.

But, this time, most of the damage is flood-related. Your policy doesn't cover that -- so that's where the feds come in. The federal government may now wave its magic disaster wand to help the people who have lost their coastal home, first or second house. If this occurs, the payoffs will be extraordinary, and I think it will shock people with the surge in gross domestic product.

We don't hear that now. First we hear of business interruptions, travel interruptions and loss of productivity. Those are a possibility. Second, we hear there will still be property casualty loss and that the best of the best are trading down. Just follow Travelers (TRV) if you want to see these issues play out, because it just posted an extraordinary quarter before the storm.

But, for the publicly traded companies that will be hurt here, these issues can come back. They will be forgiven their lost sales, and seem to be already forgiven, considering their action Wednesday.

Now, though, lets talk GDP boost. New Jersey Governor Chris Christie called the damage incalculable, and initially people thought that was hyperbole. But, speaking as someone closer to the situation than most, I can tell you that the rebuild -- if people are allowed to rebuild -- will give employment to the hardest-hit sector in the Northeast: the construction business. So there will be retail losses as they miss some days -- albeit not incredibly important days -- but the construction work will last for months. That also doesn't include home-improvement retailers.

I think that, considering the amount of business and building materials that will be used, this will far exceed the loss of time and days sales.

That's why I expect that -- in the end, when the smoke clears -- we will be hearing that this storm will have panned out more like Hurricane Andrew. That disaster ultimately spurred a monster amount of rebuild in Florida that proved to be incredibly important to a turn in the U.S. economy back in 1992.

In the end, I am calling this bullish long-term, and that's really the only term that matters.

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