CHAPTER 6

The Perfect Storm

I believe the perfect financial storm is brewing at this very
moment. If you act now, however, you might not only sidestep
the danger, but profit handsomely from it.
If you’ve ever read the book The Perfect Storm by Sebastian
Junger or seen the film version starring George Clooney, you
know that the perfect storm was not one storm but three; two
Canadian fronts and the remnants of a hurricane from the
south that all converged off the coast of New England. At the
point of convergence, each storm amplified the effects of the
other until, as portrayed in the film, a rogue wave 100 feet high
sank the vessel Andrea Gail, resulting in the deaths of the crew.
Something similar is happening in financial markets today.
Three head winds, any one of which would be challenging, have
converged to create financial havoc. Some investments are safely
in port and will survive the storm. Other investments are far out
to sea and will suffer the effects of all three head winds. Those
stocks at the point of convergence may be as helpless as the
Andrea Gail when the storm intensifies. Investors buying long-
dated put options on those stocks may have the most to gain.
The first storm is the continued currency wars. They have
been ongoing since 2010, but the start of 2015 marks a more
intense phase where beggar-thy-neighbor retaliation is happen-
ing daily. Any U.S. company with significant foreign earnings will