Bet Against the 'Cane Consensus

Editor's Note: This story was originally published on RealMoney on Aug. 29 at 8:47 a.m. EDT. We're offering it to TheStreet.com readers as a special bonus.

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The people who run Lowe's(LOW Quote) and Home Depot(HD Quote) aren't idiots. They know that they have to do business after the hurricanes pass and they aren't out to profit from the obvious gains they can make.

At the same time, the insurance companies being sent down furiously are actually in excellent shape for Hurricane Katrina and can use the storm to raise rates and shake out weak-handed players.

If you are going to go long insurers and short Home Depot and Lowe's for the next 24 hours, you will take a beating. But I bet if you can hold out for a month, you will do extraordinarily well.

I know the temptation is so great to do the wrong trade. I know that people in the media will bet the wrong trade. But there's not much you can do about it, other than let it happen and then make the moves once the dumb money takes action.

The one place you can't bet against the consensus is oil. We have seen a succession of one-time events that move oil up and then, when the events finish, oil doesn't come back down. It's completely illogical but it also happens to be the truth.

This situation won't change until we hear about a new source of supply hitting the market or one of the older suppliers -- Nigeria or Iraq -- finally getting more supply to the market. Until then, every temporary price hike remains permanent.