Hurricane Michael and Bond Portfolio Management

The devastation from Michael in terms of lives and property damage is still being assessed. Our hearts go out to those affected.

Cumberland Advisors Market Commentary

We have written (http://www.cumber.com/wildfires-abound/) about the general uptick in economic activity in a municipality after a storm or other natural disaster and the resulting maintenance of credit ratings. However, there could be a period of weakness that might or might not affect credit quality, trading levels, and ratings of affected municipalities, depending on how widespread the disaster is and the financial resiliency of the affected municipality. This resiliency depends on the availability of Federal Emergency Management Agency (FEMA) funding after a state of emergency has been declared and on insurance claims and sales tax growth from the inflow of workers and goods for rebuilding efforts. Disaster preparedness plans have improved in many jurisdictions, too. New Orleans did experience downgrades after Katrina but has since surpassed its pre-Katrina rating. The downgrades were also reflective of a city that did not have its financial house in order when the hurricane hit.

Cumberland evaluates a storm’s trajectory as early as possible, determines the municipalities that may lie in the storm’s path and compares them with bonds in our clients’ portfolios. We then sell bonds of what we see as potentially vulnerable municipalities. Although the uptick in economic activity is expected to stabilize or improve a municipality’s credit quality after rebuilding, there could be continued “headline risk” generated by media coverage of the storm damage, or financial vulnerabilities made visible in times of stress. When Michael started picking up speed and it appeared that the storm might be worse than originally thought, we embarked on the evaluation exercise and sold positions in the Panhandle that we estimated were in the storm’s path. We were able to find replacement bonds at comparable levels.

Cumberland invests mostly in AA-quality bonds that have strong, diverse and growing economic bases and good financial management, as demonstrated by large reserves and reasonable debt levels. These municipalities are less vulnerable to credit disruptions generally. We regularly review holdings, which change as new clients transfer in portfolios. We sell holdings that do not align with our credit and structuring objectives; however, we evaluate the market for an optimal time to exit positions.

Patricia Healy, CFA
Senior Vice President of Research and Portfolio Manager
Email | Bio


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Florida’s Red Tide: Possible causes, Who’s to blame?

Jim Roemer (A.K.A. Dr. Weather) has been forecasting for the commodity and ski industry for over 30 years . He splits his time between Sarasota, Florida and Vermont, and has a deep passion and concern about the environment and climate. We found his work titled, “Florida’s Red Tide: Possible causes, Who’s to blame? Implications to humans and how it can be resolved,” to be interesting and of interest to our audience. With his permission and our thanks to Jim, we share it with you today. You can find out more about Jim Roemer at his website, https://www.bestweatherinc.com.

John R. Mousseau, CFA
President and CEO
Email | Bio

Florida’s Red Tide: Possible causes, Who’s to blame?


Florida’s Red Tide: Possible causes, Who’s to blame?
Implications to humans and how it can be resolved

As a steward of trying to bring more awareness to people about global warming and protecting our environment, seeing and smelling, the Red Tide Algae in Florida, is particularly bothersome.

THE FIRST THING you notice is the smell. It’s not a scent, exactly, but a tingling in the nose that quickly spreads to the throat and burns the lungs. But then you see the carcasses.

I moved to Florida 10 years ago to enjoy the Florida beaches, but have seen first hand how Red Tide has gotten worse over the years. In the past, hurricanes such as Katrina, Irma, etc. were thought to add to the problem, but actually, we need some sort of tropical weather system to churn up the waters. This would potentially mix up and move toxins, if only temporarily. It’s ironic to think about a hurricane actually benefiting Florida, after the many disasters the Sunshine State has witnessed over the years. However, a weak system could actually be beneficial to Florida.

RED TIDE–“It’s killing sea life, battering our economy and making people sick,” says a recent Florida TV ad. “Red tide continues to devastate our area. And many feel it’s fair to blame Rick Scott.” The blame assertion is lifted from an Orlando Sentinel editorial, which appears on screen.

Please see a most recent TV ad and how once again the Florida legislature is more concerned with money in their pockets and big business, rather than helping the environment.

COULD A TROPICAL STORM CLEAN UP THE RED TIDE?
In a study I did last May, I was one of the first to predict a pretty inactive hurricane season this year, due to a combination of cooler Atlantic ocean temperatures, compared to last year; a possible weak El Nino developing and African dust that could hurt hurricane activity. The oceans are presently warming a bit more than the 1994 analog (below), so the hurricane season will start perking up. Nevertheless, the odds of a major hurricane hitting Florida or the Gulf coast this fall, is greatly reduced, compared to last year’s devastating season. That’s of course a good thing.

(How can African dust can kill the Atlantic hurricane season? See here for a recent article)

Come late fall and winter, however, when we begin to see occasional cool fronts come in from the north, this would more likely “ease” the Red Tide problem. The longer it takes to get a tropical system to hit Florida, or a major cool front to come down from the north, the longer the Red Tide problem could remain along Florida’s west coast costing billions of dollars to the Sunshine State’s tourism.

How Can Red Tide be Mitigated? History
In Florida, Mote Marine scientists have been developing a patented system to mitigate the red tide’s toxic effects. It uses the highly reactive molecule ozone—which is composed of a trio of oxygen atoms—to destroy all organic compounds, including algae and brevetoxins, while oxygenating the water. They’ve successfully tested the system in a 25,000-gallon tank and are now prepping for a pilot project in a local canal, clarifying around 600,000 gallons of water.

For now, however, scientists are continuing to monitor the blooms in Florida, hoping eventually to be able to forecast these events. But the death toll continues to climb. “Wildlife is kind of the proverbial canary in the coal mine,” says CROW’s Barron. “And right now, the canary just died.

RED TIDE and its History
Red tide is a phenomenon caused by algal blooms (Wikipedia definition) during which algae become so numerous that they discolor coastal waters (hence the name “red tide”). The algal bloom may also deplete oxygen in the waters and/or release toxins that may cause illness in humans and other animals.

Spanish explorers documented seeing it back in the 1500s. However, it remained poorly understood until a scientist named Karen Steidinger of the Florida Fish and Wildlife Research Institute in St. Petersburg spent decades putting it under her microscope. In tribute, scientists renamed the species to honor her, changing Gymnodinium breve to Karenia brevis.

Major factors influencing red tide events include warm ocean surface temperatures, low salinity, high nutrient content, calm seas, and rain followed by sunny days during the summer months . In addition, algae related to red tide can spread or be carried long distances by winds, currents, storms, or ships.

Another factor is likely that phosphorous levels in the lake are high. This is due to back-pumping water from sugar cane farms to the south. Then, due to a high amount of debris from Hurricane Irma in all lakes, rivers, and estuaries, oxygen levels in freshwater bodies have dropped. This causes levels of iron to increase in the water running off into the Florida coast. Both nutrients, phosphorous and iron, can cultivate algae like red tide.

Recent decades have brought intense blooms to Florida. A particularly bad bloom came in 1947. The brevetoxins in the air were so thick, the residents of Naples, Florida, thought armed forces had poured nerve gas into the Gulf—an observation that helped scientists discover the algae’s irritating fumes.

Charlotte and Lee counties are experiencing some of the highest concentrations of red tide in recent memory, and it’s creeping north into Sarasota. Facebook videos of dead manatees and sea turtles have gone viral, but dying gamefish like snook and endangered redfish scare Greer most.

Presently, roughly 20 million algal cells color this swath of red that recently lingered off of Florida’s southwest coast. The red tide began in October 2017, and there are no signs that the toxic plume will lift anytime soon. But the problem is not limited to Florida alone, there seems to be a global expansion of these harmful blooms, with China waters seeing a huge increase the last few years.

IS GLOBAL WARMING ACCELERATING THE PROBLEM?
There is much debate on exactly “what is causing these blooms to expand.” I am a firm believer that climate change is one of the culprits. This is because these toxins thrive in warmer waters. Of course, increasing nutrient runoff is also a major issue due to the sugar industry around Lake Okeechobee and the rapid housing boom along the Florida coast. Decades of nutrient pollution mixed with heavy rainfall and warm temperatures helped create toxic algae in Lake Okeechobee. At one point this year, blue-green algae covered 90 percent of the lake.

In a controversial study in 2008, University of Miami scientists Larry Brand and Angela Compton examined the last 50 years of data on K. brevis blooms, reporting that between 1994 and 2002, the blooms were 13 to 18 times more abundant than those striking from 1954 to 1963.

(For a great source for more information about Red Tide, please visit here:  https://serc.carleton.edu/microbelife/topics/redtide/index.html)


RED TIDE’S EFFECT ON HUMANS
(Information below is from the Florida Fish and Wildlife Conservation Commission, National Oceanic and Atmospheric Administration and Mote Marine Laboratory.)

Does Red Tide Effect Humans?
Yes, although not with such finality. The latest state report shows people at beaches from Sarasota to Naples reporting breathing problems as a result of encountering the Red Tide bloom. Usually the toxins cause only mild irritation and coughing, but they can produce serious problems for people with asthma and other respiratory problems. Health officials advise against eating shellfish from Red Tide areas because the toxins can accumulate in their bodies, poisoning humans.
Is it OK to eat seafood right now?
Most seafood restaurants aren’t serving fish and crustaceans that were caught locally, so you’ll be fine. If you want to eat a fish you caught yourself, be careful. Make sure it’s alive when you reel it in. Only eat the muscle tissue of the fish, nothing else.
Can I go swimming in the Red Tide?
If you can get past all the coughing and wheezing and dead fish floating in the water, sure! Most people don’t develop the skin irritation that bothers a few who swim through the algae bloom. However, you should be sure to shower off thoroughly when you’re done.
Can I still take my dog for a walk on the beach?
Yes, but don’t let Fido play with any dead fish or foam on the beach, and give him a thorough rinse with freshwater when he’s done — before he gets in your car, not after.
Should we find a way to destroy all algae in the ocean so we can avoid having this happen again?
No. Most blooms are beneficial because the tiny plants serve as food for animals in the ocean. They are the major source of energy in the ocean food web.


Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

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Key West, Bob Bunting

Bob Bunting, a friend and accomplished professor whose expertise includes hurricanes, joined our small, fact-finding group on a trip to Key West and five other Keys that were hit by Hurricane Irma. Here is his narrative of the trip, which he has agreed to share with our readers. We thank Bob for joining us and reflecting on his findings.

Hurricane Irma - Florida Keys

UPDATE – September 10, 2018 – Bob Bunting reminds us that one year ago, Hurricane Irma terrified citizens of Florida as the largest evacuation in US history and moved 6M people before the storm struck with 140 mph wind gusts at Marco Island before traversing the center of Florida. Had the storm moved 50 miles west, a knockout blow to Florida’s West Coast would have changed life as we know it. Now on the first anniversary of Irma, there is another massive storm named Florence that could have a catastrophic impact on the Mid Atlantic states after a weak hurricane season in 2018. It just takes one!

UPDATE – February 22, 2018 – Bob spoke,  at “Cuba and the Caribbean: What Now?” The full event ran from 8:00 a.m. – 3:00 p.m. and Bob participated in a presentation moderated by WWSB’s Chief Meteorologist Bob Harrigan. Focus was severe weather and it was held at the Selby Auditorium at USF Sarasota-Manatee.

A video of the day’s talks is available here: Cuba and the Caribbean: What Now?

On Monday, it was my privilege to accompany David Kotok, a small group of thought leaders and the press to Key West in the wake of Hurricane Irma. David, an avid fisherman, was concerned about the recovery of a small but important group of people who are professional fishing guides. As an atmospheric scientist and a former senior manager not only at NOAA but also at the National Center for Atmospheric Research, I was intrigued. Much of my life has revolved around studying, researching, and predicting severe weather events, especially hurricanes. When I was five, Hurricane Carol struck and damaged my childhood home, scaring my family. That was the moment I knew I wanted to be an atmospheric scientist. As life evolved, other interests have entered, but all have leveraged patterns and predictions as the baseline.

My takeaways from this personally impactful visit to Key West and the lower Florida Keys are far-ranging, and David asked that I share them with you.

With Hurricane Irma leading a record September for hurricanes in the Atlantic, the media was “all hurricanes, all the time.” But how quickly we forget disasters as the news cycle becomes shorter and shorter in the age of social networking, tweets, and 30-second sound bytes. The communications revolution seems to have reduced people’s ability to focus, and as a consequence very little is ever reported about the aftermath of serious disasters like Irma and Maria. That is too bad, in my view. Our visit was rich and impactful and much more interesting and educational than what we are exposed to in the daily blur. How I long for in-depth reporting.

Expectations of the government’s role in disasters have certainly changed over time. Government was created to protect life and property as its first and most important mission. It is not the government’s job to repair all the damage and rebuild once the initial disaster recovery phase is over. This is what I was told when I was forecasting severe weather events for NOAA.

The expectation of a bigger, more costly government role is hurting actual recovery processes. The real recovery structure starts with government, but the handoff after the initial phases is to a complex network of organizations, helpful volunteers, and storm victims, each with different strengths, weaknesses, and time frames.

Upon our arrival at the still lightly damaged Key West International Airport, our host Doug, a leader of professional fishing guides, began an all-day tour. He masterfully guided us as we observed how the hurricane and its aftermath had impacted the venerable and important economic subgroup of professional fishing guides.

Our first stop is a great-looking fishing retail store in downtown Key West. The owner laments that he is waiting for customers who are not coming because their impression is that there has been great damage to Key West.  Key West, 30 miles southwest of where Irma’s eye made US landfall, did sustain damage, but most repairs are complete and the town is open for business.

Next we see Doug’s house, further north and closer to ground zero where Cat 4 Hurricane Irma roared ashore.  As we pull up to his home heavy damage is evident, and the sights and sounds of workmen rebuilding create a memorable scene. Doug says he is experiencing a “too long” lull in business and explains with a half simile that he is “self-insured.” Sadly, while the hurricane was bad, the lingering perception created by media hurricane coverage continues to amplify the negative economic impact some two months after landfall.  The fish, not knowing any of this, are reported to be biting strongly.  Too bad the fishermen are not enjoying themselves here on this nearly perfect day!

Now it’s on to Big Pine Key – ground zero – some 12 miles further north.  It’s two months since landfall and we see massive damage, piles of debris, boats strewn along the roadways, one painted with “Do Not Remove.” Then more visuals, including, wrecked cars, every conceivable household item, piles of broken mangroves, and mangled street signs, one reading “Do Not Dump: $500 Fine,” next to a field of small American Flags.  Goosebumps!

This is where John, a guide with a wife and two young children, once lived. John did not want to join us in his ruined neighborhood where we met the Millennial philanthropists. He and his family are in temporary housing supported by cash philanthropy of the Guides Trust Foundation. But meet him we would at the end of this memorable day!

Money plays a critical role in recovery, but actual human assistance should not be underrated. On Big Pine Key we fortuitously crossed paths with a group of Millennials that were highly motivated to help. Going house to house, helping folks in need and sleeping in a nearby church, these young people were having a wonderful time with one another while doing great service. What a human interest story and one that has been totally missed by the media, which has long departed. BTW, this Y generation is often talked about as being both entitled and spoiled.

While I can attest to those attributes after having taught about a thousand of these young adults in my entrepreneurship classes at the University of Colorado Leeds School of Business, it is also fair to say that they are focused on helping the world be a better place. They should get credit for that! The cadre of young adults on Big Pine Key are building self-esteem and perfecting the ability to communicate socially without devices. This experience will serve them well in a 30-second-soundbite and multi-megabyte world!

All of this is “good news,” and we need to focus on more on it. The media outlet news cycle seems to recognize only political controversy and deviant behavior, while real news stories like this one are not of interest. Having met thousands of people, my guess is that 95% of them are caring, helpful, and good-to-great human beings. Such is the case in Key West, where people have pulled together in the face of great adversity and have become closer, more optimistic, and grateful!

I have questions running though my mind. Isn’t it ironic that gratitude sprouts when times are tough? What ever happened to in-depth reporting? Is it a victim of rapid communication and our multitasking society? Is the communications revolution really increasing communication or making us more remote because human interaction is not needed and perhaps not wanted? I continue to ponder.

After lunch at the No Name Cafe we stop at National Key Deer Refuge. The park ranger assures us that the wildlife and biota are all recovering nicely but says they had to truck in water for the deer because after the storm the water was too salty. Interesting!

As we head back toward Key West, iguanas are darting across the road.  They somehow found their way to the lower Keys and seem to be flourishing on the hibiscus. We pull into a small waterway, where John, the guide without a home, boats in and begins talking with us.

Still worried but not afraid, he is bubbly and optimistic about his family’s future and displays solid determination despite many issues with business and rebuilding his home.  After two months, he still waits for FEMA and the insurance companies to get to his case. His children are in a new school and the family is comfortable, thanks in part to a gift from the Guides Trust Foundation. I am struck by his clarity, resolve, and gratitude in what is a nightmare situation. His children are not afraid of hurricanes but wonder when the next one will hit. John says he has experienced three hurricanes in the past 18 years or so.

He says there is only one thing he hopes will not go back to its pre-storm condition, and that is the connection he now has with his coworkers in the guide business, not just on the Keys but all over.  I realize that John has gained something special from the disaster that took away his home, damaged his livelihood, upset his kids’ schooling, etc. Watching him, I wonder why society is so averse to experiencing setbacks that provide such meaningful learning and growth.

Hurricanes are ever-fascinating, so magnificent in organization, scope, and awesome power – but so scary when they are headed toward you! To see the gradient of damage from downtown Key West to Big Pine Key was amazing, even to someone who has flown into hurricanes. Destruction was contained in Key West but almost beyond belief in Big Pine Key just 29 miles away, where a 10-foot storm surge and 130 mph winds created an unearthly scene. As an atmospheric scientist who is one because of a hurricane long past, I am certain I followed the right path.

The piles of debris are memorable. The fact that we humans lead lives that are defined in part by artificial “needs” and the consumption a lot of stuff hit me. I am told that 1.2 million cubic feet of debris has been removed from the area north of Key West, and it looks like millions more are still waiting for removal. It will take time.

It is remarkable how well the infrastructure did in the face of the storm, even on Big Pine Key, confirming that hurricane-prone areas need to be built using methods and materials that ready them for storms. A few weeks after Irma, Maria hit Puerto Rico. The impacts were similar, but the outcome was different.

Clearly, investments in infrastructure in the Keys have provided a strong backbone, but Puerto Rico lacked that advantage. My takeaway is that governments can function well at strategic levels if the people running them are capable, honest, and motivated to protect. After all, this is the #1 function of government.

As we took off in the Twin Air for our trip back to Sarasota, I looked back at the runways and a view of the beautiful Keys just before sunset. I am ever more clear as to how what happened on Big Pine Key could have happened on Longboat Key/Sarasota, where the forecast was for a Cat 5 hit with a 10-foot storm surge. A very small change in path happened as Irma moved over Big Pine Key – that jog to the north drove Irma inland east of Longboat/Sarasota by about 30 miles… the same distance that separates Key West from Big Pine Key! So grateful!

In closing, I am surprised at how much this trip inspired me. First we saw devastation, then we observed that the initial government-led recovery, followed by a complex web of nongovernmental help backed by individual and organizational philanthropy and victim self-help, seems to be working – more proof, in my opinion, that we can do anything we want once we decide what we want to do. What a Good News story!

Bob Bunting
CEO, Waterstone Strategies
bobsstocks.com

Pledges to the Guides Trust Foundation can be made through their website: http://guidestrustfoundation.org/memberships-donations.cfm

See pictures online at www.cumber.com/key-west-bob-bunting/


Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

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Puerto Rico and Recurring Hurricanes

Last Monday, November 6th, I was privileged to serve on a panel discussion at the American Enterprise Institute in Washington DC, where the topic was Puerto Rico after Hurricane Maria. The discussion covered a wide range in topics that included the damage to Puerto Rico as well as issues of finance, law, and markets.   The proposed solutions to the problems ranged from a Marshall Plan-type of approach to direct Federal oversight.  Included in the discussion were the social issues that are also affecting Puerto Rico and in some cases are obstacles to progress.  The link to see this panel discussion is here:

http://www.cumber.com/john-mousseau-panelist-at-american-enterprise-institute-puerto-rico-discussion/

One of the panelists at AEI was Alex Pollock. Alex is a distinguished fellow at the Washington-based R Street Institute, where he provides thoughts and policy leadership on financial issues.  Here is the link to his bio:

http://www.rstreet.org/people/alex-j-pollock/

Alex has written a terrific piece on the meteorological conditions that affect Puerto Rico, and hurricanes in particular. His analysis has implications for the rebuilding of Puerto Rico near-term, as well as longer term-implications on issues running from federal intervention to possible future statehood.  With Alex’s permission we present it here.

John R. Mousseau, CFA
Executive Vice President & Director of Fixed Income
Email | Bio

 


Puerto Rico has a long history of many disastrous hurricanes, as once again this year with the devastating Hurricane Maria.  These disasters recur frequently, historically speaking, in an island located “in the heart of hurricane territory.”   Some notable examples follow, along with descriptions excerpted from various accounts of them.

-In 1867, “Hurricane San Narciso devastated the island.”  (Before reaching Puerto Rico, it caused “600 deaths by drowning and 50 ships sunk” in St. Thomas.)

-In 1899, Hurricane San Ciriaco “leveled the island” and killed 3,369 people, including 1,294 drowned.

-In 1928, “Hurricane San Felipe…devastated the island”–“the loss caused by the San Filipe hurricane was incredible.  Hundreds of thousands of homes were destroyed.  Towns near the eye of the storm were leveled,” with “catastrophic destruction all around Puerto Rico.”

-In 1932, Hurricane San Ciprian “caused the death of hundreds of people”—“damage was extensive all across the island” and “many of the deaths were caused by the collapse of buildings or flying debris.”

-In 1970, Tropical Depression Fifteen dumped an amazing 41.7 inches of rain on Puerto Rico, setting the record for the wettest tropical cyclone in its history.

-In 1989, Hurricane Hugo caused “terrible damage.  Banana and coffee crops were obliterated and tens of thousands of homes were destroyed.”

-In 1998 came Hurricane Georges–“its path across the entirety of the island and its torrential rainfall made it one of the worst natural disasters in Puerto Rico’s history”—“Three-quarters of the island lost potable water”– “Nearly the entire electric grid failed”—“28,005 houses were completely destroyed.”

-In 2004, Hurricane Jeanne caused “severe flooding along many rivers,” “produced mudslides and landslides,” “fallen trees, landslides and debris closed 302 roads,” and “left most of the island without power or water.”

-And in 2017, as we know, there was Hurricane Maria (closely following Hurricane Irma), with huge destruction in its wake.

These are some of the worst cases.  On this list, there are nine of them in 150 years.  That is, on average, one every 17 years or so.

All in all, if we look at the 150 year record from 1867 to now, Puerto Rico has experienced 42 officially defined “major hurricanes”—those of category 3  or worse.  Category 3 means “Devastating damage will occur.”  Category 4 means “Catastrophic damage will occur.”  And Category 5’s catastrophic damage further entails “A high percentage of framed homes will be destroyed…Power outages will last for weeks to possibly months.  Most of the area will be uninhabitable for weeks or months.”

Of the 42 major hurricanes since 1867 in Puerto Rico, 16 were Category 3, 17 were Category 4, and 9 were Category 5, according to the official Atlantic hurricane database.

Doing the arithmetic (150 years divided by 42), we see that there is on average a major hurricane on Puerto Rico about every 3 ½ years.

There is a Category 4 or 5 hurricane every 5.8 years, on average.

And Category 5 hurricanes occur on average about every 17 years.

There are multiple challenging dimensions to these dismaying frequencies–humanitarian, political, engineering, financial.  To conclude with the financial question:

-How can the repetitive rebuilding of such frequent destruction be financed?  Thinking about it in the most abstract way, somewhere savings have to be built up.  This may be either by self-insurance or by the accumulation of sufficiently large premiums paid for insurance bought from somebody else.  Self-insurance can include the cost of superior, storm resistant construction.  Or funds could be borrowed for reconstruction, but have to be quite rapidly amortized before the next hurricane arrives.  Or somebody else’s savings have to be taken in size to subsidize the recoveries from the recurring disasters.

Is it possible for Puerto Rico to have a long-term strategy for financing the recurring costs of predictably being in the way of frequent hurricanes, other than using somebody else’s savings?


Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.

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Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.