These lead to tighter credit conditions and falling stock prices as their collateral assets are liquidated. In this case, two of the failures are insurance companies, whose assets are entirely financial securities.

The catastrophic destruction of wealth than began in January 1990 has left assets ? equities and real estate, mainly ? deflated against a mass of liabilities that are mainly bank loans.

We expect very significantly higher prices, higher deductibles and tighter terms and conditions as a result of Katrina. For the next year or two, underwriting results, absent another large catastrophe, should be very, very strong.

If gas prices go up, the consumer is going to be a little tighter than they were.

The market is working. The prices are falling.

If the euro does tumble again -- and we think it will -- we must expect the ECB to orchestrate another round of currency intervention.