Investing in the End of the World

 | Jan 03, 2012 | 9:30 AM EST  | Comments
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Stock quotes in this article:

cpb

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pep

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ko

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rgr

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cx

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dks

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teva

I hope that you had a wonderful New Year with family and friends. Now it's back to work, keeping an eye on the kids and making sure the portfolio is not attacked by the news of the day. As investors shake off the typical bout of holiday laziness and hopefully return to the game with an appreciation for mistakes made in 2011, there are a couple of opposing views on the markets and global economy to consider.

A peculiar sense of calm (we've learned that when this calm arises, it's vital to keep investing senses heightened) has engulfed the circumstances of the European Union's austerity and debt-deleveraging, compliments of action and jawboning by the powers that be. As luck has it, the U.S. market welcomed another month of unemployment below 9% and about 160,000 new jobs created in December (excluding government jobs, which are projected to decline). On the other hand, opinions regarding fourth-quarter earnings season are trickling in, with the term "earnings miss" being heard on more than one occasion.

Amid such diverging views, my feel for the market is a little short-circuited. Domestic economic data is cause for optimism, but beware of potential landmines. Overall, though, there will be much to digest this week, and my eyes are on how bank stocks behave (they underperformed in 2011) and if the pickup in volume is steered towards buying risk instead of approaching it tepidly ahead of the jobs report.

I don't know how events will unfold, so I would like to address a topic that has been tossed around a lot but not really applied to the investing community. It's appropriate to at least consider how to invest for the end of the world.

A growing number of people believe a cataclysmic or transformative event of some kind will occur on Dec. 21, 2012. One group (all of this is based on the end of the Mayan long-count calendar) thinks Earth and its inhabitants will undergo a positive physical transformation. Others subscribe to thoughts of massive solar storms, magnetic pole reversal, alien battles, or an unexplained plague. Yet another camp anticipates a nuclear war. Maybe you fall into one of these categories -- it's cool, I'm not here to judge, but I want to make you as much money as possible beforehand.

Let me make it clear that the stocks I discuss today are a starting point, and this is a column to print out and put on the refrigerator. Why? First, to learn from investing mistakes in 2011 -- primarily missing moves to the upside or having gains wiped away due to inaction. Chances are this happened because you didn't understand a company's story. To be successful, you have to detach yourself from buying stocks with knowledge gained from a 10-minute read of the 8-K. I often say that my greatest investing weapon is the understanding of a company's history. By knowing a company's background, it's easier to identify a fundamental turn for the worst or smooth sailing.

Second, if Y2K and the Rapture (recent phenomena where we were all supposed to turn to dust) were any indication of hype sparking fear, rest assured that the potential end of Mother Earth will trigger ingrained human traits of protecting family and surviving at any cost. You don't have to believe in Mayan hocus pocus, but realize that other people may not share that view and will want to be prepared for global demise.

The stocks below don't necessarily have to be bought at this time -- the rule of thumb is that equities will rise or fall six months in advance of a particular future event (I know that's a very textbook statement, but it holds true to a certain extent). Like preparing for a hurricane or other natural disaster, I want your mind equipped when the 2012 hype begins. Believe me, that hype is itching to start.

Fun Fact

In 1999, retail sales at grocery, food and beverage, general merchandise, and health and beauty stores began to accelerate midyear in anticipation of the Y2K glitch that was supposed to shut down all computers and bring modern life to a screeching halt. But other retail categories did not grow as quickly. If people were stocking up on survival items in fear of a computer glitch, imagine what could arise from the end-of the-world worries.

End of the World Investments

  • Campbell Soup Co. (CPB): It does more than sell cans of soup.
  • PepsiCo (PEP) and Coca-Cola (KO): Both companies do more than offer sugary drinks.
  • Smith & Wesson (SWHC) and Sturm Ruger (RGR): Gun makers -- need I say more?
  • Cemex (CX): You'll need cement for that underground shelter.
  • Dick's Sporting Goods (DKS): For a tent and a buck knife.
  • CVS Caremark (CVS): Better to have those daily medications socked away.
  • Teva Pharmaceutical (TEVA): Go generic.

Please don't hesitate to send me any other ideas to play off this disaster scenario. I like to think of it as an open-ended discussion throughout the year. Or, at least until the world ends.

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