Editor’s note: Florida just experienced another massive hurricane landfall…
Hurricane Idalia struck near the community of Keaton Beach last Wednesday morning. The Category 3 storm flooded streets, closed several airports, and led to a lot of power outages.
Some Chaikin PowerFeed readers might know that both Pete Carmasino and Vic Lederman live in Florida. Fortunately, they’re both OK. And their properties didn’t suffer any damages.
But the whole event reminded us of an essay that Vic originally wrote back in November 2019. At the time, he was a research analyst at our corporate affiliate Stansberry Research.
We asked our friends at Stansberry if we could republish Vic’s essay. And they graciously agreed. So today, we’re sharing an updated version with you…
It’s a classic lesson about preparing for hurricanes – and in the markets. And as you’ll see, Vic’s message still rings true…
Seven years ago, I moved to Florida to work in finance…
I strolled to an office on the beach each day. And it seemed like paradise.
Then, I experienced my first hurricane season…
One storm hit the area where I live. My home is on relatively high ground, so it was fine. But many others near me weren’t.
I’d never seen the power of weather quite like that…
I grew up in Colorado. And the mountains of snow we got when I was a kid were nothing like the pounding force of a hurricane.
But the force of the storm wasn’t the thing that stood out most to me. It wasn’t the aftermath, either. Those two things were mostly in line with my expectations.
What stood out most to me was how people expressed their fear of risk – how they prepared for the storm.
Right now, a lot of investors are worried about the markets. They see unemployment rising, high interest rates, and an inverted yield curve. And they’re preparing for a storm.
But as I’ll show you today, these folks are going about it all wrong…
If you’ve never lived in a hurricane-prone area, let me tell you…
It changes the way you think about risk.
Everyone has their own way of dealing with the threat. And I didn’t expect such a huge range of behaviors.
One group of people stood out the most. And it wasn’t the last-minute shoppers who picked the store shelves dry.
I couldn’t help but notice one preparation strategy. That’s because it came at an obviously high cost…
I’m talking about the “early boarder-uppers.”
This group of mostly affluent people chose to board up their homes very early. Some folks did it as soon as the news reported a slight chance the storm would head our way.
Then, they got out of Dodge.
Now, I understand that everyone’s life situation is different. For some of these folks, it probably was the best decision.
But many of them made a classic mistake. Investors fall into this trap all the time…
These early boarder-uppers spent a lot of money trying to limit all possible risk as early as they could. But they should’ve been patient and waited to see how things progressed before making a rash decision.
They just needed a better risk-management strategy.
By waiting a few days, they would’ve gotten more (and better) information about the storm. And in turn, they could’ve made a better-informed decision about whether to stay or leave.
Maybe they could’ve avoided the hassle and cost of evacuating altogether.
My point is simple…
Trying to eliminate all risk is a risk itself. And it certainly has a cost.
When it comes to the markets today, it’s not time to board up yet!
Remember, the Power Gauge still sees plenty of opportunities…
The benchmark S&P 500 Index itself still earns a “bullish” rating. And six of the 11 top-level market sectors earn “bullish” or better ratings as well.
We could be looking at months of gains ahead of us – perhaps even years of gains.
If you board up now, you could miss out on all that upside.
Good investing,
Vic Lederman
