NEW YORK (Reuters) - How do you invest for the end of the world?
A U.S. Christian radio network has been creating a stir with predictions an earthquake will shake the world on Saturday (May 21), sweeping the righteous to heaven and leaving others behind to be consumed in a ball of fire in October.
It left some on Wall Street on a relatively quiet day of trading to ponder the strategy to end all trading strategies.
“The end of the world trade is a sucker’s bet because if you’re right, well, your counterparties are dead and you have nobody to collect from, and if you’re wrong you owe a lot of money,” said Barry Ritholtz, CEO and director of equity research at Fusion IQ in New York.
But just for the sake of discussion, Ritholtz wasn’t too keen on the housing market, since land would hardly be at a premium.
“It would be terrible for housing prices. It’ll reduce demand and put additional inventory on the market,” he said.
Others would place bets that stocks will fall as the labor force and number of investors go up in smoke.
“Assuming somehow I escaped and lived through it, I guess I would want to be short a lot of stock index futures and buy a lot of puts,” said Tom Sosnoff, CEO of tastytrade.com, a financial news network website based in Chicago.
That said, he wouldn’t get completely irrational and dump a stock that’s risen twelvefold in two-and-a-half years.
“I would probably want to be long Netflix because nothing can make that stock go lower, even the end of the world,” said Sosnoff. The online movie rental company, despite the best efforts of short-sellers, is up 245 percent in the last 12 months.
But what if the righteous go this weekend and the sinners don’t meet their demise five months later? That leaves a big crowd of sinners to live out their years eating too much, drinking excessively and puffing away on cigarettes.
Liquor companies, cigarette makers, gambling establishments, pornographers and all others who peddle anything that make the “bad” feel “good” would be a safe bet.
Perhaps this is a case of “buying the rumor.” The VICEX Fund, which invests in these industries, was up 14 percent through April, outperforming the S&P, which was up just 9.1 percent.
For some, the best proxy for an end of the world trade was the market meltdown during the financial crisis and Great Recession. Heck, an Internet search for “end of the world trade” brings up tons of links to the financial meltdown, and just a couple of mentions of May 21, 2011.
Something else to think about -- geography. Americans tend to take their religion very seriously, leaving fewer people for economic growth than in the more agnostic parts of the Earth, like Europe.
Then again, if you’re still pondering this, it may be too late -- all of the major global markets are closed for the weekend.
Writing by Chris Sanders; reporting by Ed Krudy, Doris Frankel and David Gaffen; editing by Dan Grebler