Winter’s Only Just Begun; An End to California’s Drought by Chris Orr, The Sovereign Investor

Reporting from South Dakota  – Everyone in the northern half of the United States is wondering what the winter is going to look like — from companies preparing for the impact of colder weather, to individuals preparing to store enough natural gas to heat their homes.

From where I am in South Dakota, you’d probably expect me to be neck-deep in snow. But old man winter is taking a bit of a breather after a powerful sprint out of the gate in November. Just last week, it was sunny and 70 degrees!

Bear in mind, winter doesn’t officially begin until Sunday, so we still have plenty of time for cold temperatures and snow to hammer the U.S.

Based on my charts, the next polar vortex will place the eastern half of the U.S. in a deep freeze right around Christmas Day.

Of course, if you had been listening to commodities traders at Thanksgiving, you may have thought winter was over. There was talk that the snow plowing season was over and there wouldn’t be any more Arctic air to contend with. They had retailers nearly ready to bust out the suntan lotion and air conditioners.

However, traders often have very, very short memories. Winter’s early start seemed to throw off their calendar — acting as if it’s already February when the winter solstice is still six days away.

I guess that’s why weather savvy investors make bank and other investors get derailed.

If you want cold, snowy weather I have good news: Just wait until next week. If you have travel plans, bring a good book to the airport and some extra cash for snacks. Expect thousands of flight delays across the country between Christmas Eve and New Year’s Day.

My forecast of a chilly eastern U.S. and soggy California winter is right on target.

Goodbye Drought, Hello Flooding

Also at play is a weak to moderate El Niño that will strengthen during early January. El Niño, “The Christ Child,” gets its name because Peruvian fishermen have noticed for decades that phenomenon develops right round Christmastime.

El Niño’s influence was felt last week as copious amounts of rain fell on the West with mudslides and flooding. This weather pattern will feed rain soaked storms toward California through April, breaking the drought at long last. Rainfall will be at least 150% of normal and parts of central California will probably get 300% of the normal winter rainfall.

The rain may not entirely wipe out the drought, but there will be much more water in reservoirs next summer.

The storm systems will then parade across the Southern Plains and Southeast, bringing chilly, wet weather for the rest of the winter. The cool temperatures will mean plenty of natural gas will be used as furnaces click on more often. Sleet and freezing rain will be a problem across much of the South again this winter — bad news for travelers but good news for companies that supply road salt.

Lakes and ponds long dry from the Southern Plains drought will refill over the course of the winter.

We’ll see more cold air surge across the northeast half of the U.S., too. The Canadian chill will strain natural gas supplies and bring more snow. As you recall, a lot of road salt was used last year thanks to persistent snowfall. That created a shortage of road salt, and I suspect that a lot more salt will be used this winter.

Prepare for the Next Polar Vortex

Overall, this winter will be similar to last winter, but not quite as brutal. Looking at my charts, I see 10 large storm systems sweeping the country between now and the end of February. These will be storms that impact large swaths of the country, while smaller storm systems will be sprinkled in between.

I expect at least two storms to dump 20 inches of snow from Virginia to Maine between Christmas and the first day of spring.

Including the one between Christmas and New Year’s, the coldest regions of the Polar Vortex will impact the eastern half of the country five times this winter. The coldest of the air will be 20 to 30 degrees chillier than normal.

While you’re bundling up for the return of cold temperatures, don’t forget to prepare your portfolio to take advantage of the impact of colder weather on companies. There are so many good, juicy winter stocks to squeeze profits from, but I am avoiding naming a specific one because we’re talking about the most successful stocks at Precision Profits. We’ll be watching for opportunities in retail, transportation, and the natural gas sectors, just to name a few.

Last winter, we saw many companies issue earnings warnings due to the unexpectedly bitter temperatures and snow. And we could see many similar situations develop this winter as well.

There’s a silver lining in every cloud,

Chris Orr

Certified Consulting Meteorologist

Winter's Only Just Begun; An End to California's Drought