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Tuesday, September 19, 2017

While most market participants will be paying close attention to results of the latest FOMC meeting today and tomorrow — where interest rates are expected to remain unchanged but an unwinding of the Fed’s $4.5 trillion balance sheet looks to begin in earnest — those in the Caribbean still recovering from Hurricane Irma two weeks ago now face another Category 5 storm: Maria. Currently barreling down on Puerto Rico, Hurricane Maria has already caused severe damage to smaller islands in the region such as Dominica and Guadaloupe.

According to reports from meteorologists, Hurricane Maria is one of the fastest growing hurricanes in recorded history. And with Puerto Rico and the U.S. Virgin Islands in its direct path, residents of the Bahamas and — yes — Southern Florida also look to take a wallop. Sustained winds of 160 mph and warnings that the storm’s damager could be “catastrophic” for the region, President Trump has already declared states of emergency in both Puerto Rico and the U.S. Virgin Islands.

Meanwhile, Hurricane Jose — which ventured back out to the Atlantic after briefly threatening the Southeast coast of the U.S. days after Irma made landfall — continues to create choppy surf up the Atlantic coast as far north as Cape Cod, Massachusetts. This storm appears reluctant to actually strike land, but the longer it remains in cyclone formation, the more prolonged the risk this happens is.

The U.S. still works to recover from the two earlier hurricanes that struck this summer; Hurricanes Harvey (in Southeast Texas off the Gulf of Mexico) and Irma (in the Caribbean and up the Gulf coast of Florida) are estimated to claim an overall price tag of $290 billion. The estimated path of Maria — if it does strike the continental U.S. and doesn’t spin back out to sea like Jose did — would more likely arrive on the Atlantic side of Florida, Georgia and/or the Carolinas. But because the storm is traveling at just 9 mph currently, it is difficult to project when the storm is likely to make landfall. Perhaps not for another week, if at all.

Nelson Peltz Faces a Storm of His Own

Turbulence for the founder and CEO of Trian Partners — activist investor Nelson Peltz — is impacting the news cycles ahead of the opening bell this morning: Procter & Gamble (PG - Free Report) , the $240 billion market cap retailer of healthcare, grooming and home goods has issued a statement this morning that takes direct aim at Peltz’s investment performance. Recall Peltz is aggressively pursuing a seat on P&G’s board, which the company is apparently aggressively pushing back against.

The analysis from the company’s report suggests that Trian tends to buy into companies when they are undervalued, they gain slightly over the next finite period of time, then sink back down to earlier levels. Even more pointedly, P&G’s report says that Trian’s best investments are those in which Nelson Peltz is not awarded a board seat. It is a rather unique approach to dealing with an activist bid, but then again P&G is the largest corporation to ever face such a challenge from an activist investor.

Mark Vickery
Senior Editor

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