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"There cannot be a crisis next week. My schedule is already full." -- Henry Kissinger
Murderers' Row The 1927 New York Yankees won 110 out of 154 games played. The lineup was famous for being able to send one Hall of Fame caliber hitter after another to the plate. Baseball fans came to know the team as the "Bronx Bombers". Sports writers and opposing pitchers referred to that lineup as the "Murderers' Row". If you follow American sport, you've heard of them all... Babe Ruth, Lou Gehrig, Earle Combs, Tony Lazzeri, etc.
Now, as the Houston, Texas area tries to rebuild the fourth largest local economy in the United States after what Hurricane Harvey did to that region, we awake to find that a deadly 8.1 magnitude earthquake tore up southern Mexico Thursday night. The west coast of that nation braces for possible tsunamis Friday morning. You already know this story of human suffering is far from over. Hurricane Irma is still tossing the Caribbean around, with the storm's cross hairs apparently set anywhere from the southern half of the state of Florida all the way up to the Carolinas. Behind Irma, still a very scary category four to five storm, is Hurricane Jose, a category three in its own rights. That storm is barreling toward the lesser Antilles. Is that all? No. Hurricane Katia is expected to slam into Mexico's east coast on Saturday. Three hurricanes and an earthquake all in a very short time, all in the same part of the world. These storms are killing people, and destroying property and local economies.
Like most of you, I know several people who live on the Florida coasts. Some have left the state. Some have fled to central parts of the state (really hope that helps). Some have decided to stay put, either due to their status as first responders, or their profound Irish stubbornness. We can only pray for those folks. As for the state of Florida, it remains almost impossible to gauge the impact on the insurance companies. Also impossible is to estimate the impact on agriculture. About all we know there, is that no matter where you live in the U.S., you are going to pay more for produce. Think tomatoes, oranges, cucumbers, etc.
More than 20 million people reside in Florida, making the state the third most highly populated in the Union, behind California and Texas. When you include the states of Georgia, and South Carolina, Hurricane Irma will likely impact the lives of over 35 million human beings. Now, include the people of eastern Texas and Louisiana, who are already suffering. Wow. The number of Americans who are likely to be disrupted by any one of these storms approaches 50 million people. Let that sink in. How many Americans are there... 330-ish million?
This now becomes an issue that will impact the national economy. From lives to the cost of recovery, to the impact on confidence. Where will demand be after this? We know people will rebuild, so demand will be there for materials and for skilled labor. These are tricky questions that will not go away any time soon. The scars of people impacted by tragedy do not heal quickly. Maybe not ever. This nation will hold, though. This nation will continue to unite. Americans are, and will always be, resilient.
This may seem cold, but from an investment point of view, there is still a job to do. I remain long Home Depot (HD) , which is a core holding of mine, and has been for several years. I also remain long Weyerhaeuser (WY) and Owens Corning (OC) . I only bought those two ahead of the Texas storm expecting to see increased demand for building materials. They have not let me down, and I would think that obviously those two just turned from short-term trades into medium-term investments.
I told you in my September Strategies letter that I had taken profits in Walt Disney (DIS) , but remained long small. That much is true. Talk about the big ugly. DIS took it on the chin on Thursday after CEO Bob Iger disappointed investors as he guided the firm's 2017 performance toward its 2016 performance. This came while addressing the future of any Disney streaming service that is hoped to compete by 2019, as well as to shore up sagging numbers at ESPN. I know that many of you are also long DIS, as this one is a broadly held retail investor type name. What, now, to do with this hot potato? Well, I can't tell you that, but I will tell you what I did. You make up your own mind.
I read Iger in almost real time. Still, I was not as fast as the algos, so I waited. All day long. Some of you tried to reach me. I did not answer. I apologize. This is why. I waited until I saw some stabilization in the name Thursday afternoon. I waited until the daily RSI edged off of 30, as the intra-day moving average convergence divergence (MACD) was not a reliable indicator. Then I tiptoed back in near enough to the day's lows. Is the selling done? I don't know, gang. I am but a man. Irma is about to wreck the tourist trade in central Florida. I left enough room in my portfolio to buy more if the need/opportunity presents. I also wrote par (100) call options (all covered) expiring in mid-October, as that premium was trading at well over a buck. Disney reports on Nov. 7. This action lowered my net effective cost for the shares that I bought Thureday to a little over $95, and knocked my overall average down to just under $100.
This is called risk management. You must learn how to manage a bad situation. Turn a sharp negative into a manageable negative. Keeping your head in the sand when blindsided in a position is a poor strategy. The best traders that I ever knew lost much of the time. The game we play is not about winning percentage; this sport is about margin of victory. Key to remember, you are not in love with any stock, because no stock is in love with you. Never, ever forget that. Hoping for the best is not your strategy.