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We are in the midst of the most active hurricane season in living memory.
Current estimates predict that the United States will spend billions of dollars recovering from Hurricanes Harvey and Irma.
This hurricane season has been a historic humanitarian disaster for the United States, and there are still eight more weeks to go.
My family and I are fortunate to live outside of the zone that typically gets hit by hurricanes.
We're far enough north and inland on the East Coast that we rarely see more than some modest flooding.
However, since mid-August, my house has been awash in hurricane activity.
My lovely and talented wife is the global crisis and issue manager for a Fortune 100 company.
That means I have a ringside seat as she expertly coordinates airlifts, humanitarian aid, emergency equipment, and replacement parts for half a dozen plant sites and thousands of employees impacted by three hurricanes that hit Texas, Florida, and Puerto Rico.
And as I've watched her working all hours of the day and night over the past few weeks, two thoughts repeatedly came to mind…
First, a deep sense of sorrow and loss for all those impacted by these tragedies, followed by wonder at the resilience and resourcefulness at the people working at breakneck speeds to help those who need it.
My second thought is how these natural disasters will affect the market.
When we analyze the impact natural disasters have on the market, we have to look at it from two different vantage points – long term and short term.
And it's that exact insight that I want to share with you today.
I'm going to break down what this year's hyperactive hurricane season means for the market.
And after that, I'll show you how our 10-Minute Millionaire system is going to best position us to profit along the way.
The Long-Term View
After any natural disaster, there is one question I'm almost guaranteed to be asked on a daily basis – will it stimulate the economy?
While the short-term and intermediate-term answers are a bit more complicated, the long-term answer is a clear and resounding no.
For most people, it's intuitively clear that destroying something like a home or business is bad for the economy.
But others only see the "new" construction efforts and conclude that it stimulates the economy.
The problem with this way of thinking was first given voice in a story commonly known as the "Broken Window Fallacy" in the 19th-century book "That Which Is Seen, and That Which Is Not Seen" by Frédéric Bastiat.
In the story, Bastiat asks what happens to a shopkeeper (often identified as a baker in modern retellings) whose careless son breaks his shop window.
Bystanders console the owner saying that good comes out of this because the glazier (window replacer) will earn six francs for the replacement job and "in his heart, bless the careless child."
In return, the glazier will buy some goods or services in the town with the six francs, and the economy of the village will be stimulated.
Bastiat then says that this scenario ignores that which is "unseen."
Had the son not broken the glass, the shopkeeper would still have a fine window and could use the six francs to buy a new suit (I know what you're thinking – inflation, right?).
The suit maker then buys goods and services in the town, and the economy of the village is stimulated.
So what's the difference in the two scenarios?
There is the same amount of stimulus, but the shopkeeper only maintains status quo in the broken window scenario, while he adds to his net worth a new suit in the second.
The 10-Minute Millionaire mindset adds a more capitalistic twist: What if instead of buying the suit, the shopkeeper/baker bought an additional oven and increased his production capacity?
Then not only does the oven manufacturer get paid, but the baker eventually produces extra profits so he can buy a new suit, new shoes for his son, and take a vacation in the south of France.
The bottom line?
Those who claim that hurricanes stimulate the economy are only looking at "things that are seen" and aren't seeing the unseen facts.
New wealth is not created by replacing destroyed things and, in fact, opportunities for putting that money to more productive use are missed.
The Short-Term View
Now, when we look at the short-term impact, things are a little different.
About the Author
Nationally recognized technical trader. Background in engineering, system designs, and risk reduction. 26 years in the markets.