Hurricane Matthew Disrupts the Economy to Start Q4 Off Poorly

$2 Billion Dollars. 

Not much in the grand scheme of things but that's the probably cost of Hurricane Matthew along it's projected path that takes it up the Florida coast and all the way to North Carolina before turning back to sea.  iShares US Insurance (IAK) is the insurance ETF and it's weighted to American International Group (AIG), Chubb (CB), MetLife (MET), Prudential (PRU), Travelers (TRV), Aflac (AFL) Allstate (ALL) and Progressive (PGR) – a good mix of companies likely to take a hit in a storm.

Ordinarily, we have no interest on betting on storms but the insurance sector (IAK) is particularly complacent this year after 3 straight years of low-damage storms and, of course, a lot of the insurance stocks are dividend-payers and dividend-payers have been in high demand this year as investors have been chasing yield.  We've already seen a pullback in Utilities (XLU) which have been down 9 straight days, so Insuance is due for a drop anyway - and we still have another 3-4 weeks of hurricane season to go.

Florida has already declared a state of emergency in 26 counties and has asked President Obama to call out the National Guard, with all their men and equipment – so we can ring the register already.  Home Depot (HD) and Lowe's (LOW) tend to benefit from storms as people prepare and then repair their homes but for most businesses, it's a lost weekend of commerce and that's where the real costs come in – as well as disruptions in travel.  While oil bulls may be excited about supply being shut in – so is demand!  

Screen Shot 2016 06 15 at 8.26.05 AMThis is not a good way to start off the 4th Quarter as Corporate Profits continue to plunge, even as changes in Minimum Wage Laws are pushing Compensation higher and that, my friends, is how we end up having a margin squeeze.  Overall, as I noted over the Nasdaq on Monday, rising wages are a net positive for the economy but first the wages have to go to the people and THEN they start buying more stuff and THEN the companies grow their revenues and…
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