The Perfect Storm

Investing in Dividends

Written by Jimmy Mengel
Posted August 16, 2018 at 9:57AM


ONE midwinter day off the coast of Massachusetts, the crew of a mackerel schooner spotted a bottle with a note in it.

The schooner was on Georges Bank, one of the most dangerous fishing grounds in the world, and a bottle with a note in it was a dire sign indeed. A deckhand scooped it out of the water, the sea grass was stripped away, and the captain uncorked the bottle and turned to his assembled crew:

“On Georges Bank with our cable gone our rudder gone and leaking. Two men have been swept away and all hands have been given up as our cable is gone and our rudder is gone.

The one that picks this up let it be known. God have mercy on us.”

That passage opens The Perfect Storm, a thrilling book about the dangers and perils of swordfishermen.

The book talks about the Andrea Gail, a 72-foot ship that took off from Gloucester, Massachusetts, in September 1991. It never returned.

Author Sebastian Junger describes the terror that the crew experienced as it was hit with historic waves projected to have hit almost 100-feet high.

The six-man crew was swallowed by the sea after it encountered the massive storm front. The captain’s last words were “She’s comin’ on boys, and she’s comin’ on strong.”

Are we facing a similar situation with the stock market?

Now, deep-sea fishing is risky business. One study shows that fishermen’s fatal accident rates were twice those of coal miners and more than 20 times the rate of men in manufacturing industries.

According to the U.S. Bureau of Labor Statistics, an average of 116 out of every 100,000 fishermen die in job-related accidents. In comparison, only around 64 out of every 100,000 people who work with explosives die on the job.

Some estimates put fishing as the second-deadliest occupation there is, after logging.

But for men who have little education and an appetite for adventure, the reward often seemed worth the risk. An average swordfisherman at the time could have made thousands of dollars for a few weeks’ work. That’s a good haul. And it freed them up for long shore leaves that were full of drinking and debauchery in New England bars and generally living the good life.

During the trip before its fateful ending, the Andrea Gail had been out at sea for just under a month and hauled in 15 tons of swordfish. The crew sold the catch for $136,812, plus another $4,770 in tuna.

Bob Brown, the owner of the boat, took home $53,000 after expenses. The rest was distributed among the crew: $20,000 to Captain Billy Tyne, $6,453 to Alfred Pierre and Dale Murphy, $5,495 to “Bugsy” Moran, and $4,537 each to Robert Shatford and Douglas Kosco.

That’s decent money for blue-collar fishermen...

In The Perfect Storm, the bar that the doomed crew frequented was actually called the Crow’s Nest (incidentally the name of my income newsletter).

The Crow’s Nest is a block-long faux-Tudor construction across from the J. B. Wright Fish Company and Rose Marine. The plate-glass window in front is said to be the biggest barroom window in town. That’s quite a distinction in a town where barroom windows are made small so that patrons don’t get thrown through them. There’s an old pool table, a pay phone by the door, and a horseshoe-shaped bar. Budweiser costs a dollar seventy-five, but as often as not there’s a fisherman just in from a trip who’s buying for the whole house. Money flows through a fisherman like water through a fishing net; one regular ran up a $4,000 tab in a week.

This is where I want to start to discuss investing...

To me, a dangerous mission where you head out into open waters to return with a few grand in profits isn’t very appealing. My philosophy is that you shouldn’t have to work that hard for your money. You should instead let your money work for you.

You also shouldn’t chase profits and set yourself up to be wiped out in the event of a market storm...

Even though you can predict heavy seas and rising tides with the right research and instruments, the sea is a mighty mysterious place.

As investors, we could be wading into similar waters right now. We may think that everything’s smooth sailing, but one rogue wave could knock us completely off course — or sink us entirely.

Trade wars from President Donald Trump’s tariffs, global uncertainty with Russia and North Korea, and a simple market overreaction to the rise in interest rates could send the market into a panic. Or it could be as simple as big hedge funds and institutional investors deeming the market to be overvalued and starting to sell off like we saw in February.

Research by Fasanara Capital has shed some needed light on the dark waves that the market could hit…

“The signposts of a potential market crash are coming in with increasing hubris,” Francesco Filia, Fasanara Capital’s CEO, said in a recent client note.

He cited the swift market fluctuations from earlier this year, which he’d actually predicted in January. “Stocks are in complete bitcoin territory,” he said in January. “[They are] totally disconnected from fundamentals.”

The next month, the Dow dropped by over 3,200 points (12%) over two weeks. That included two 1,000-point drops! It rose back from the ashes, but it still served as a shot across the bow for volatility that could yet again rear its ugly head.

“One could argue that if a wave takes a piece of a boat out, maybe it shouldn’t be there. Or one could argue that that’s just what waves do—tear down what men put up.”

But considering that we may see our investments as the boat itself and the stormy seas as the stock market, a few things need to be said. Things can get dangerous very quickly.

You can study charts all day. You can watch the stock market ebb and flow. But in the end, we’ll always go through bull and bear markets. Ships will have months of smooth sailing before they inevitably hit a bad storm.

There’s no way around it. So, you can either jump ship after a nice haul or batten down the hatches and continue to fish.

I, for one, plan on the latter...

That’s why I’m so focused on recession-proof dividend stocks. You can hold them through any storm you can imagine. And like a buoy, they’ll pop right back up after the storm subsides. It’s far easier to sink a single ship then it is to sink an entire fleet. And that’s why everyone’s portfolio needs to be diversified. If you’re banking on one or two stocks to set yourself up for retirement, you’re living the swordfishing life and setting yourself up for a deadly encounter.

That’s why I’ve written a 100-page book about 27 different companies that you can use for monthly income. And you can get your copy today, for free.

It’s called The Big Black Book of Income. The book has sections on real estate investment trusts (REITs), dividend aristocrats, master limited partnerships (MLPs), and utilities. All of these would bring you consistent dividend payouts in solid businesses. If you claim your copy today, you'll also get a four week video course about each individual section.

If you're serious about collecting thousands in monthly income while fortifying your investments against any "perfect storm", you'd be wise to give it a read.

Again, it's free to read today...


Jimmy Mengel

follow basic @mengeled on Twitter

Jimmy is a managing editor for Outsider Club and the investment director of the personal finance advisory, The Crow's Nest, and cannabis stocks advisory, The Marijuana Manifesto. For more on Jimmy, check out his editor's page.

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