What index funds that will benefit from resent disasters

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Kingfish
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What index funds that will benefit from resent disasters

Post by Kingfish » Mon Sep 11, 2017 8:53 am

Looking for suggestions on index funds that will benefit from resent disasters in Texas and Florida!

Da5id
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Re: What index funds that will benefit from resent disasters

Post by Da5id » Mon Sep 11, 2017 8:59 am

At a guess, building and building supplies will do well. Insurance badly. But why would you think index funds, which tend to be broader based, are a good way to try and profit from these events? And moreover, why would you think that any profit to be made from the hurricanes isn't already priced into the markets?

bberris
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Re: What index funds that will benefit from resent disasters

Post by bberris » Mon Sep 11, 2017 9:07 am

Before I became bogled, I took positions in dividend payers, and for tax reasons, still have them (True confession, I still dabble). I ended up too heavy in insurance. With the first news of the hurricanes these shares got clobbered. When the "resent" disasters actually happened, they recovered.

Just for your entertainment, look up SIGI chart. Now, do you still think you can profit using this information?

aristotelian
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Re: What index funds that will benefit from resent disasters

Post by aristotelian » Mon Sep 11, 2017 9:23 am

They already did. News has happened and results are priced into the market. You are too late.

chevca
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Re: What index funds that will benefit from resent disasters

Post by chevca » Mon Sep 11, 2017 11:32 am

Seems a lot like speculating. No thanks.

livesoft
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Re: What index funds that will benefit from resent disasters

Post by livesoft » Mon Sep 11, 2017 12:00 pm

I think the answer to the OP's questions is simply:
ALL of them.

Basically, money that was locked up in emergency funds will now get spent on re-accumulating the trappings of modern life: Homes, cars, appliances, food, health care, and so on.
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flyingaway
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Re: What index funds that will benefit from resent disasters

Post by flyingaway » Mon Sep 11, 2017 12:07 pm

Is it too late to ask this question?

tolerable2323
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Re: What index funds that will benefit from resent disasters

Post by tolerable2323 » Mon Sep 11, 2017 12:10 pm

Kingfish wrote:
Mon Sep 11, 2017 8:53 am
Looking for suggestions on index funds that will benefit from resent disasters in Texas and Florida!
Why don't you just short the market?

gkaplan
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Re: What index funds that will benefit from resent disasters

Post by gkaplan » Mon Sep 11, 2017 12:34 pm

Hoping to capitalize on the misfortunes of others doesn't seem very ethical.
Gordon

Da5id
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Re: What index funds that will benefit from resent disasters

Post by Da5id » Mon Sep 11, 2017 12:38 pm

gkaplan wrote:
Mon Sep 11, 2017 12:34 pm
Hoping to capitalize on the misfortunes of others doesn't seem very ethical.
No call to be judgmental. It isn't illegal, so the question seems fine to me. Moreover, it isn't to my mind in any way unethical. Buying all the plywood available and reselling for $100 for a sheet would be considered unethical profiteering on others miseries, IMHO. Buying Home Depot stock because you think the hurricanes will make it go up (not saying it will, just an example) not so much.

22twain
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Re: What index funds that will benefit from resent disasters

Post by 22twain » Mon Sep 11, 2017 12:48 pm

livesoft wrote:
Mon Sep 11, 2017 12:00 pm
ALL of them.
So you might as well go with a total stock market fund, if you aren't in one already. Vanguard's Total Stock Market ETF (VTI) is up more than 1% so far today.
My investing princiPLEs do not include absolutely preserving princiPAL.

livesoft
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Re: What index funds that will benefit from resent disasters

Post by livesoft » Mon Sep 11, 2017 1:05 pm

Since August 21st when Harvey was in the Atlantic (named on 8/17, hurricane on 8/24), Total US Stock Market is up almost 3% (including today) and Total International will be up more than 3% at the end of the day (from 8/21).
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rbaldini
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Re: What index funds that will benefit from resent disasters

Post by rbaldini » Mon Sep 11, 2017 1:24 pm

Agreed with others that it's too late: this is the epitome of public knowledge. Unless you can better predict Irma's future path and effect on the industry than the rest of the market (and evidently you can't, which is why you're asking in a public forum), you won't be able to take much advantage of the disaster.

But I'm wondering: for those who think these disasters will cause an increase in something like the Total Stock Market Index - isn't that sort of a broken window fallacy? Sure, some industries will benefit. But on the whole, lots of property has just been destroyed. That's a bad thing. If anything, shouldn't we expect economic productivity and therefore returns to decrease, if only by a small amount? Or am I fundamentally missing something here?

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Re: What index funds that will benefit from resent disasters

Post by saltycaper » Mon Sep 11, 2017 1:28 pm

Kingfish wrote:
Mon Sep 11, 2017 8:53 am
Looking for suggestions on index funds that will benefit from resent disasters in Texas and Florida!
Don't you mean funds that will suffer due to recent disasters?

I think the question is okay, but the exclamation point might be in poor taste. :P
Quod vitae sectabor iter?

livesoft
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Re: What index funds that will benefit from resent disasters

Post by livesoft » Mon Sep 11, 2017 1:37 pm

rbaldini wrote:
Mon Sep 11, 2017 1:24 pm
But on the whole, lots of property has just been destroyed. That's a bad thing. If anything, shouldn't we expect economic productivity and therefore returns to decrease, if only by a small amount? Or am I fundamentally missing something here?
That property mostly in private hands wasn't doing too much for my portfolio I would think. Now that owners of that private property probably want to make themselves whole again, they will have to give up some of their money to others.

Sure, some of the money will come from insurance companies which themselves own stock in Home Depot building supply companies, and things that they use to hedge their bets, but a lot will come from selling bonds and the US government printing money.

I think that many publicly-traded companies will still pay salaried workers who were/are not working during the disaster, but some companies will pay overtime (utility restoration workers that come from all over the country) which will increase some economic activity.

When I look at these things, I try to see where the money ultimately goes. A piece of plywood doesn't produce itself. It relies on human activity to get from a tree to a roof and humans demand money for their activity all along the way.
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Re: What index funds that will benefit from resent disasters

Post by nisiprius » Mon Sep 11, 2017 1:46 pm

Sorry, Kingfish, but one of the great illusions of the novice investor... one that is reinforced by novels and movies sometimes... is that you can make clever investment moves based on old news--headlines from days or weeks ago, that everybody already knows about.

In order to beat what you can get by investing in a total market index fund--you have to think something different from what everybody else thinks. You have to be in a minority. Most well-informed investors have to think you are wrong, if not crazy. And you have to be right and everybody else has to be wrong. This rarely happens.

For example, suppose you believe that, contrary to forecasts, Hurricane Irma is going to hit Providence, Rhode Island with devastating effects, so you go off and short the stocks of every S&P 500 company that's headquartered in Providence which would be... ummm... two of them, Citizens Bank and Textron. Now if Acuweather is right and Providence gets nothing but "cloudy with rain possible," you lose your shirt. But if, contrary to all forecasts, this turns out to be another Hurricane of 1938,
Image
then you win big.

But you can't win by waiting until after the hurricane hits Providence, because by then the stock prices of Citizens Bank and Textron will already have plunged and shorting them will be very dangerous.

In short, you have to take a big risk. By the time the gamble is safe, because you already know what has happened or what is overwhelmingly likely to happen, it is no longer very profitable and indeed may result in a loss.
Last edited by nisiprius on Mon Sep 11, 2017 1:50 pm, edited 1 time in total.
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rbaldini
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Re: What index funds that will benefit from resent disasters

Post by rbaldini » Mon Sep 11, 2017 1:49 pm

livesoft wrote:
Mon Sep 11, 2017 1:37 pm
rbaldini wrote:
Mon Sep 11, 2017 1:24 pm
But on the whole, lots of property has just been destroyed. That's a bad thing. If anything, shouldn't we expect economic productivity and therefore returns to decrease, if only by a small amount? Or am I fundamentally missing something here?
That property mostly in private hands wasn't doing too much for my portfolio I would think. Now that owners of that private property probably want to make themselves whole again, they will have to give up some of their money to others.

Sure, some of the money will come from insurance companies which themselves own stock in Home Depot building supply companies, and things that they use to hedge their bets, but a lot will come from selling bonds and the US government printing money.

I think that many publicly-traded companies will still pay salaried workers who were/are not working during the disaster, but some companies will pay overtime (utility restoration workers that come from all over the country) which will increase some economic activity.

When I look at these things, I try to see where the money ultimately goes. A piece of plywood doesn't produce itself. It relies on human activity to get from a tree to a roof and humans demand money for their activity all along the way.
So should we pray for hurricanes every year, to grow our economy?

I can't prove anything, but just consider all the days of work lost due to the fact that entire cities were flooded. Presumably Houston's total productivity took a big hit for a few days, and is still lagging. Isn't that bad? All those destroyed cars and railways mean that workers have a harder time getting to work. Bad? Maybe companies still pay them, but then surely the company's bottom line still suffers - isn't that bad? Would such a company pay less of a dividend? Or perhaps it would eat into money that the company had intended to invest in some new production or technology? Growth suffers as a result?

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Re: What index funds that will benefit from resent disasters

Post by livesoft » Mon Sep 11, 2017 1:52 pm

nisiprius wrote:
Mon Sep 11, 2017 1:46 pm
In order to beat what you can get by investing in a total market index fund--you have to think something [SLIGHTLY] different from what everybody else thinks. You have to be in a minority. Most well-informed investors have to think you are wrong, if not crazy. And you have to be right and everybody else has to be [SLIGHTLY] wrong. This rarely happens.
One doesn't have to be completely right while everybody else is wrong unless your goal is to make a killing. But if you think you might be satisfied with a 0.1% or 0.5% outperformance, then you also won't be too disappointed if you happen sometimes to underperform by 0.1% to 0.5% ... as long as your years of underperformance don't come to dominate your decisions and your portfolio. That is, your "cone of probability" is mostly in the right direction.
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livesoft
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Re: What index funds that will benefit from resent disasters

Post by livesoft » Mon Sep 11, 2017 1:59 pm

rbaldini wrote:
Mon Sep 11, 2017 1:49 pm
I can't prove anything, but just consider all the days of work lost due to the fact that entire cities were flooded. Presumably Houston's total productivity took a big hit for a few days, and is still lagging. Isn't that bad? All those destroyed cars and railways mean that workers have a harder time getting to work. Bad? Maybe companies still pay them, but then surely the company's bottom line still suffers - isn't that bad? Would such a company pay less of a dividend? Or perhaps it would eat into money that the company had intended to invest in some new production or technology? Growth suffers as a result?
Since I am familiar with Houston, I might be allowed to comment. Productivity might come down to who actually was affected. The working affluent and wealthy will recover quickly and I would assert they are closer to the top of the food chain than folks who make less money. They have the assets to replace or lease vehicles and get back to work. They will likely work extra hours going forward to make up for lost time.

The homeless and folks a little bit higher than homeless in socioeconomic status will take lots more time to get going again, if they even can accomplish that. Perhaps Katrina is a past example: I think (but cannot cite a study) that New Orleans lost more of its middle-class and up who never went back to NO and ended up in other areas such as Houston, Dallas, and San Antonio.

EtA: Here is an article describing a little bit of the human side of what I wrote about above: https://www.nytimes.com/2017/09/11/us/h ... laced.html
Last edited by livesoft on Mon Sep 11, 2017 5:17 pm, edited 2 times in total.
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grabiner
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Re: What index funds that will benefit from resent disasters

Post by grabiner » Mon Sep 11, 2017 5:08 pm

Kingfish wrote:
Mon Sep 11, 2017 8:53 am
Looking for suggestions on index funds that will benefit from resent disasters in Texas and Florida!
None more than any other.

The reason is that investors already know about the disasters, and have bought and sold investments at prices reflecting the new reality. For example, with a lot of refineries shut down, fuel prices are up; this hurts the profitability of businesses which consume fuel and haven't signed long-term contracts, so their share prices have declined. Conversely, refiners who aren't in the affected areas will have increased profits, so investors have already bid up the share prices.
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munemaker
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Re: What index funds that will benefit from resent disasters

Post by munemaker » Mon Sep 11, 2017 5:13 pm

Kingfish wrote:
Mon Sep 11, 2017 8:53 am
Looking for suggestions on index funds that will benefit from resent disasters in Texas and Florida!
I advise against doing this. It is market timing. Just buy the total stock market index and you'll do fine.

venkman
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Re: What index funds that will benefit from resent disasters

Post by venkman » Tue Sep 12, 2017 1:16 am

rbaldini wrote:
Mon Sep 11, 2017 1:49 pm
I can't prove anything, but just consider all the days of work lost due to the fact that entire cities were flooded. Presumably Houston's total productivity took a big hit for a few days, and is still lagging. Isn't that bad? All those destroyed cars and railways mean that workers have a harder time getting to work. Bad? Maybe companies still pay them, but then surely the company's bottom line still suffers - isn't that bad? Would such a company pay less of a dividend? Or perhaps it would eat into money that the company had intended to invest in some new production or technology? Growth suffers as a result?

https://www.theatlantic.com/business/ar ... my/375594/

I'm not an expert and can't speak to the accuracy of this study, but it seems pretty comprehensive. Bottom line is that they conclude storms are bad for economic growth.
Hsiang and Jina find that such storms (which they group under the umbrella term "cyclones") can be as bad as some of the worst sorts of man-made economic challenges. A cyclone of a magnitude that a country would expect to see once every few years can slow down an economy on par with "a tax increase equal to one percent of GDP, a currency crisis, or a political crisis in which executive constraints are weakened." For a really bad storm (a magnitude you'd expect to see around the world only once every 10 years), the damage will be similar "to losses from a banking crisis." The very worst storms—the top percentile—"have losses that are larger and endure longer than any of those previously studied shocks."

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