Investing and the weather
Another huge subject that unfortunately I will only be able to cover in a general sense.
Weather events have the ability to move any market, heck, even entire economies. They can make individual plays either skyrocket or plummet. And while often it is said that once the news is out it’s too late to make a play, this is not always the case with weather related plays. A big reason for this is that extreme weather events can impact the supply availability of commodities for a very, very long time. Hurricane damage can last for months – even years. Floods, droughts etc. can also last a very long time giving folks plenty of times to make a play – just look at nat gas right now. So although it is good to be ahead of the game, with weather related plays you can get in late and still make money.
Understand chain of events…..try to also look into the domino effect instead of just the more “straight forward” play. An example would be, let’s say it is a dry winter, which often leads to a dry summer so fertilizer prices should rise as farmers try to make the best out of things. So fertilizer companies may see a good rise. Since extra fertilizer can’t completely make up for lack of rain, corn prices should rise as well. Keep thinking down this chain of events and you’d see that since chicken need to eat whatever the weather, the producers of chickens should see less profits. Taken another step further, this would rise to more costs to say KFC.
As you can see, there will be winners and losers from any extreme weather event, and since recovery from these events takes a long time, you don’t necessarily need to be the first one in to make money. And don’t just limit your thinking to grains for example … extreme weather can impact insurance plays, autos, transportation of all kinds, fast food, clothing, retail, infrastructure, well drillers, irrigation companies, energy, real estate, tourism, utilities ….. the list is nearly all inclusive across most every market!
