-----Original Message-----
From: 	Miro Pasic <Miro.Pasic@morganstanley.com>@ENRON [mailto:IMCEANOTES-Miro+20Pasic+20+3CMiro+2EPasic+40morganstanley+2Ecom+3E+40ENRON@ENRON.com] 
Sent:	Thursday, September 13, 2001 10:07 AM
To:	Miro Pasic
Subject:	Assesing the Impact on Various Industries

  
The following is a brief summary of our analyst's views on the impact of the WTC tragedy on different industries/sectors. More detailed reports can be found on our client link website. 
Industry / Company Updates 
REITs, Life Insurance & Annuities, Oils, Specialty Finance, Asset Management & Brokerage, 
Insurance - Property/Casualty. Leisure/Cruise lines, Storage, Electrical Utility, Advertising. 
REAL ESTATE INVESTMENT TRUSTS           WTC'S IMPACT ON MANHATTAN OFFICE REITS 
- Could see as much as 25 million sqft of downtown office impacted 
- Companies with major office exposure in NYC  Brookfield Properties has the most significant downtown office exposure; Boston Properties, Equity Office, SL Green and Vornado have most assets in Midtown. 
- Suburban office companies may see increased demand  Reckson and Mack-Cali have the most significant New York metro suburban office exposure; Consequently our rating on CLI is under review. 
LIFE INSURANCE & ANNUITIES              ASSESSING THE IMPACT OF THE WTC TRAGEDY 
- The tragic events of September 11 will impact several operations  Group and individual life insurance, disability, COLI, and even annuity operations will be impacted by the disaster at the World Trade Center and Pentagon on Tuesday. 
- Institutional operations and reinsurance will likely be hardest hit  Life reinsurers and companies with significant group life and group disability operations will likely face significantly higher losses as they pay the claims of the victims. 
- Difficult to assess individual company impact so far It is logical to expect that New York domicile companies will have higher exposure.  We also expect fundamentals of companies with large group life, AD&D, and disability to be under 
pressure. 
- We are waiting on additional information before adjusting estimates  Industry fundamentals will likely come under pressure, and estimates will fall materially for several companies.  However, we believe the industry has substantial excess capital to absorb these losses. 
ENERGY: OILS                            CRUDE OIL OUTLOOK UPDATED: BP REMAINS FAVORITE 
- Crude Oil Outlook $25-30 For 2H 2001 But...  Supply and demand to be balanced during 2H 2001, with stocks to remain around 75 days forward demand. This is a positive price scenario. 
- Recent Global Tensions to Require Reassessment  Demand will likely slow with reduced economic growth. Output disruption in Afghanistan would have a negligible impact on markets.  Iraq and Iran would be significantly more concerning. 
- Maintain Market Position With Positive Bias  "Super Major" BP (PT $65/sh.) remains our favorite integrated oil, with ExxonMobil and Royal-Dutch/Shell expected to Outperform as well. 
FINANCE: SPECIALTY/MORTGAGE             ISSUES TO CONSIDER IN THE AFTERMATH 
- Reassessing fundamentals in aftermath of WTC attack  While we can't opine with confidence on macro-economic trends or investor sentiment, we can reassess the fundamental outlook for our two sectors in the light of greater uncertainty. 
- Remain confident in mortgage finance fundamentals  The housing markets benefit from secular drivers that should help withstand potential impact of the WTC attack on consumer confidence or economic growth. 
- Patience may still be required in the credit card sector  While we're encouraged by the slowdown in consumer credit growth, we feel it is too early to bet on a turn in the credit cycle. 
ASSET MANAGEMENT & BROKERAGE            TAKING STOCK 
- Providing Some Perspective on this week's Tragedy  Details are still coming in, but in the near-term we expect reduced capacity and higher volatility in the brokerage sector.  For asset managers, continued weak flows. 
- Near-term Tug of War is likely  Key issues are the unsettled global markets, partially offset by the potential for additional 
central bank liquidity.  Separately, infrastructure and operational issues will make things "choppy" at best. 
- Are globalization, deregulation, and retirement savings still the key?  We think so, but we acknowledge a backlash towards global connectivity could slow capital flows, expansion, and consolidation. 
INSURANCE - PROPERTY-CASUALTY           THE AFTERMATH OF TRAGEDY 
- Largest loss, by all accounts: The World Trade Center attack will be the largest insured event in history. 
- Our current working range of losses is $25-30 billion  This is up to 20% higher than figures being quoted by some others.  We believe such a loss would not pose a bankruptcy threat or rating threat to most major insurers. 
- Strong companies will recoup losses through higher rates  Being adequately capitalized, companies with strong claims-paying ratings will be well-positioned to write profitable business at much higher rates in 2002. 
- Investors should try not to overreact  When the market opens, we would not sell into panic, and for stocks that you otherwise  want to own, we would add on weakness. 
  
LEISURE/CRUISE LINES                     WHERE IS VALUATION SUPPORTIVE? 
- Recent Strength In Cruise Demand Primed To Reverse 
Despite recent positive signals surrounding cruise demand, there is no question in our mind 
that bookings will slow over the next several months in the wake of current events in NYC and DC. 
- Lowering 2002 Demand Growth Assumption To 7% From 9%  As such we're taking down our '02 industry yield assumption to (2%), and our EPS estimates by 8% for Carnival and 15% for Royal Caribbean. 
- The Big Question -- How Will The Market React Once Trading Resumes?  To prepare ourselves for all potential outcomes, we conducted a valuation sensitivity analysis showing what levels the stocks should be considered oversold, fairly valued, and over valued. 
- We Expect A 20% Hit To Cruise Stock Prices  This would leave the stocks as cheap as they should get on real numbers -- even in recessionary times. With 30% or more, we'd be buyers. With little move, we'd likely be sellers. 
ELECTRIC UTILITIES/UNREGULATED POWER     DEFENSIVE PORTS IN A STORM 
- Electric power stocks should benefit from 'flight to quality'  We expect regulated and unregulated/integrated groups to perform well relative to the market when trading resumes, as investors rotate into defensive stocks. 
- Regulated utilities are classic defensive stocks  Our favorite integrated names that are still heavily regulated monopolies with safe dividends are FPL, TXU and ETR - each trading at 10-11X '02E and yields of 3-5%. 
- Integrateds have served as bellweathers in such difficult times  We would also be buyers of highly liquid, solid, well-diversified integrated utilities.  DUK and D are our favorites among such a list. 
- Unregulateds inherently defensive & may benefit from greater volatility  Little exposure to consumer confidence as primary end market of electricity sales are highly stable and resistant to economic cycles.  Our favorites are CPN & MIR. 
AD HOC: ADVERTISING AND MARKETING SERVICES         THE MOURNING AFTER: ASSESSING 
- History of war's impact on ad spending indicates potential lift for '02 . Looking at five wars since 1900, US ad spending showed an incremental lift of 170 basis points, on average, during the first year of war. 
- Outdoor and Magazine ad media have outperformed in similar times  These two media increased 7.7% and 6.1%, respectively, during the five major US wars of this century.  Radio, Newspapers and Broadcast TV follow with growth of 4.4%, 2.9% and 2.0%. 
- Morgan Stanley economists seem to be assuming 10% market correction  Advertising & Marketing Services consumer-oriented clients are likely to have more valuation downside.  All of our consumer sectors should be considered market weight. 
- Companies associated with consumer staples may be safer right now  Catalina and Valassis could be considered slightly safer if their consumer staples advertisers in groceries and pharmacies retrench less than other marketers. 
ENTERPRISE SOFTWARE                INDUSTRY ANALYSIS 
- Enterprise Software Impact:  For the near term we see incremental risk for the September 
quarter since software companies tend to close most of the deals in the last ten days of the 
quarter.  Decisionmakers are likely to be pre-occupied with other decisions.  Companies with 
particular expsosure the brokerage community such as Tibco and Advent Software (portfolio 
management software) would be at the top of the list for incremental risk in the short term. 
Longer term, these events underscore the need for backup and recovery software and Veritas 
would likely see some benefit over time as well as  Oracle who's database has built in features for replication and hot backup capabilities (in conjunction with Veritas).  Reliability and recovery issues will become more important items on 
the checklist as will consulting services.  - Oracle will go forward with its earnings release this evening after the close of the market.  We are expecting 8cents per share in earnings