Hurricanes are very interesting and even more interesting if you do not live within the hurricane belt. One of the greatest storms was Hurricane Sandy and in a book called Super Storm – 9 Days Inside Hurricane Sandy by Kathryn Miles, Dutton, NY, 2014 the author goes to the people who try to understand hurricanes and predict their outcomes. Up above the clouds the winds of the world generally flow in the same direction and follow a predictable pattern. The general shape of the land and the circular flow of the ocean currents allows for weather to be predictable. In the case of the path of Hurricane Sandy, the Gulf Stream which starts in the Caribbean moves up the US Southeast around the Outer Islands or Hatteras, North Carolina the stream bends toward Europe. If you were sailing, you could put your boat on the gulf stream and in 3 months circle the Atlantic Ocean with little effort. There is a similar stream in the south Atlantic and Pacific Ocean. Hurricanes tend to follow this pattern to.

In addition, up in the sky there are natural forces which tend to block the worst weather from the New York area, in the case of Hurricane Sandy the natural blockers moved which allowed Sandy to aim for New York. You can imagine, because of the size of Sandy and all the rules changing, everyone knew the affects were going to be bad, but no one expected it in their community. People relate to what they know or have been through, in the case of New York, their past experience was a smaller Hurricane which caused damage, the city was up and running within a week. On top of its winds, Sandy brought new concerns – storm surges – this type of Hurricane sucked the water up and  released it as the land became shallower, this cased the waves to that much larger. An interesting experiment is to hold up a glass of water; next hold up a pail of water; next a washing bin. Chances are lifting the washing bin was not done; it just shows the weight of water. Times that washing bin by what you can see when you are at the beach in the summer. Water in a storm surge causes a great deal of damage and very few things will stop the force of water coming from the sea.

Linking to dividend paying stocks, the above discussed exceptional circumstances, and when it happens there is not much to do but get out of the way. A whole bunch of things happened to create Hurricane Sandy and its path that do not normally happen; the risk managers will ask is this the new normal or once every 50 years? Unfortunately no one really knows because things happened that normally should not have. When investing, there will be exceptional events; however good companies’ prices rebound faster. While people talk about a flight to quality, the reality is most run to quality stocks when something goes bad. The time to run is when things are going okay or good. If you keep the bulk of your investments in quality stocks or profitable ones, over the long term you will have more money. If those profitable stocks pay a dividend, you have two simple methods for analysis – are they still profitable? can they still pay a dividend? If the answer is yes, then you can decided to do nothing or move to better quality stocks.

There are more questions than answers, till the next time – to raising questions