Eagle Eye Opener: The Sandy Effect: ‘Buy When There’s Mud in the Streets’

Eagle Eye Opener

The Sandy Effect: ‘Buy When There’s Mud in the Streets’ (CNBC.com)

Even if Hurricane Sandy wasn’t exactly what Baron Rothschild had in mind when he advised to buy when there is “blood in the streets,” the investment opportunities arising in the wake of this epic natural disaster certainly hammer home the theme of finding opportunity from crisis. While making money from another’s misfortune can be distasteful, when the profit scale is as enormous as it could be here, many investors find that a spoonful of sweet profits helps them to swallow. Just ask Frank Holmes, CEO/CIO of U.S. Global Investors, as he discusses “the positive multiplier effect” that comes into play when a country has to dig out from an event like Sandy. In this case, Holmes estimated the Hurricane Sandy-driven factor would be five, meaning damages up to $20 billion will generate economic spending and activity of about $100 billion. In the end, investors may be left with a philosophical question, when pulling in big winner after big winner,  Is it wrong to thank a hurricane?

‘Compression Front’ to Slam into Market Today (Yahoo.Finance.com)

After a two-day absence of trading, investors returning to the market today already expect a healthy dose of volatility. But according to Chris Bertelsen, CIO at Global Financial Private Capital in Sarasota, Fla., investors also should be on the look out for the “the compression effect” — a situation whereby one day of trading represents three. More importantly, when a “3-for1” compression day pops up in the midst of a painful earnings period and on the heels of a hurricane-forced market closing, share prices could react violently. So, traders are warned to keep a sharp eye on their exit strategies.

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It was a shortened trading week with the New York Stock Exchange closed for trading for two days because of Hurricane Sandy. As of Friday, the Dow Jones Industrial Average was up a hairsbreadth of 0.04%, and the S&P 500 was down 0.08%. The MCSI Emerging Markets Index rose 0.41%. There was a lot more action in your Alpha Investor Letter portfolio. Most notable was Stratasys inc. (SSYS), which rocketed 10.39% on high earnings expectations based on rival 3D Systems

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