The Wall Street Journal Guide to Investing in the Apocalypse Make Money by Seeing Opportunity Where Others See Peril James Altucher and Douglas R Sease For Claudia Altucher, I hope you survive me if any of these apocalyptic chapters come true For Jane Sease, my partner and best friend in good times and bad Contents Introduction One: An Ill Wind: The Fundamentals of Apocalyptic Investing Two: Pandemic! Three: Nor Any Drop to Drink: The Emerging Fresh Water Crisis Four: Tough Oil Five: Is It Just Me, or Is It Getting Warmer? The Looming Threat of Global Warming Six: Nothing to Fear but Fear Itself: The Threat of Terrorism Seven: Close Encounters with the Death Star Eight: Game Over! The End of Capitalism Conclusion A Quick Guide to Apocalyptic Investing James Altucher’s Apocalyptic Reading List Searchable Terms About the Authors Credits Copyright About the Publisher INTRODUCTION HOW WILL THE WORLD as we know it end? Will it be with a whimper as the last human beings succumb to some viral epidemic sweeping the globe? Or will it be with a bang when an asteroid slams into the planet? No one knows for sure But what we know is that there will be some very close calls that will be scary A pandemic spreads A terrorist detonates a nuclear bomb in a major city and claims to have more ready to explode Ice caps melt, coastlines are submerged, and crops wither from drought Clean fresh water becomes increasingly difficult to obtain Or maybe it is oil that becomes scarce Or a global financial panic erupts that regulators cannot contain Any one of those scenarios could occur in our lifetimes The one thing they all have in common is that their occurrence will touch off panic and, in some cases, hysteria As a result, these events will also contain the seeds of profit for investors who stay calm and think rather than panic and run That said, one important note before we go any further: while this book deals with some truly frightening events—some of which will almost certainly happen one day—we aren’t setting out to worsen your fears Rather we want to show you, first, how you can overcome those fears by putting many of these events in their proper perspective Then, we want to explain how to prepare your finances not just to survive an event should it strike, but to prosper as a result We don’t want people to get sick; we don’t want another terrorist attack; and we certainly hope the planet doesn’t cook itself into oblivion However, there are people out there thinking about these things very hard and trying to find solutions Many of those who succeed will become justly wealthy and there’s no reason you shouldn’t take advantage of their good fortune and make it part of yours In The Wall Street Journal Guide to Investing in the Apocalypse we want to help you think about these unthinkable events, defend your financial life against their consequences, and maybe even emerge in better shape than before they happened What This Book Is About At the heart of this book lies our observation that historically significant events—the assassination of a president or an arch-duke, an economic depression, or a global pandemic—have a significant, and observable, impact on investments We believe that, in the face of apparent cataclysm, the professional traders and money managers, along with hordes of ordinary investors, will lose their nerve and desperately seek the safety of cash or even gold The mad rush to sell will drive the prices of a broad array of securities and other assets far below any concept of fair value Prices will reflect the investors’ assumption of the worst But what if the worst doesn’t occur? In that case all but the most shaken eventually will return to the financial and other markets Their purchases will then drive asset prices higher, perhaps back to fair value or beyond In any event, those who did not assume the worst and bought the assets all the others were selling will stand to profit handsomely as prices rebound This is contrarian investing in the most basic sense The opportunities don’t come along often, but when they they can make a huge difference in investment performance for those with a steady hand, an analytic mind, and an optimistic outlook We call this methodology “event-based investing,” and this book is a guide to mastering it What constitutes an event? In this book, we’ll use that term to refer to anything that threatens to upset the normal ebb and flow of markets and economies Most people think of an event as something that occurs suddenly, such as the explosion of a terrorist bomb or a political assassination But events can occur over much longer periods of time, ranging from days to years to decades The Great Depression that plunged the United States into despair was an event, as was World War II, which saved the world from tyranny and reignited our nation’s economy at the same time Viruses that cause pandemics may hover threateningly in the background for years before suddenly blossoming and doing their worst damage Global warming scenarios will play out over decades Also, different events inspire different levels of fear Terrorism touches off immediate fear, a pandemic creates gradually escalating levels of fear over a period of months and, at least for the moment, few people appear to be even the least bit worried about the looming global shortage of fresh water How fast or slow an event occurs and what degree of fear it inspires doesn’t change the possibility of defending against it and perhaps profiting from it, only the time it takes to make a decision and act on it Event-based investing is not for everyone It requires an ability to anticipate seemingly earthshattering events and to measure the risks appropriately It also insists that you think unemotionally about the consequences of both the anticipated event occurring and of the possibility that it won’t occur or that the consequences will not be as fearsome as others predict In The Wall Street Journal Guide to Investing in the Apocalypse we purposely push the concept of event-based investing to the farthest edges of what might be possible In the coming pages we will closely analyze several potential global threats, the probabilities of their occurring, and the opportunities they might present for the contrarian investor who doesn’t fall victim to hype and hysteria Some of these events will be man-made: financial catastrophe, for example, stems from human actions Others, such as pandemics, are rooted in nature Some of the events we discuss are related: global warming and the coming shortage of clean fresh water have common roots in the burgeoning world population And some are more likely to occur than others The challenge for investors is how to get ahead of the curve now to reap profits in 2020 or beyond While we admit to pushing the envelope in our analysis of potentially apocalyptic events, we firmly believe that the lessons and disciplines that we draw from these chapters are useful for much more likely and much less catastrophic events No portfolio should be based solely on playing the angles of the day’s news Long-term investing with a widely diversified portfolio has been and will remain the core of a successful approach to investing for almost all individuals (and, truth be told, for professionals, too) Nevertheless, an understanding of how to think about the implications of events much less awe-inspiring than the apocalypse can provide a significant performance advantage for investors alert to the possibilities Event-based investing need not—indeed, should not—be complicated There is little new under the investing sun and some of those things that are new—collateralized debt obligations and other exotic financial derivatives—almost spelled our doom in 2008 Our approach to apocalyptic investing can be done straightforwardly with simple securities that are easy to understand, such as stocks, bonds, and even mutual funds Those with a bent for investing may enhance their returns through the use of options The difference between this and other investing books is that we offer a way to think about investing that, while using simple tools, provides a sophisticated strategic approach that can become an integral part of a broader long-term portfolio of diversified assets It is always risky to name stocks in a book intended to serve investors for years, but we take that risk for two reasons First, there are some companies that should be in any long-term portfolio because of their potential to soar in times of crisis These are companies that are engaged in worthy and profitable endeavors that will be able to bring expertise and financial muscle to solving the problems that threaten us Second, we will highlight some companies because they demonstrate how to execute an event-based investment strategy assuming certain conditions In other words, these companies illustrate our approach, but shouldn’t necessarily become part of your portfolio of apocalyptic investments And in the interest of full disclosure, you need to know that Douglas Sease owns shares of General Electric in a long-term retirement account and that, at the time of publication, James Altucher, or any entity managed by James Altucher, owns none of the stocks mentioned in this book In the end this book is intended to help investors learn to think about finding the companies and other assets, both large and small, that will be the beneficiaries of various cataclysms What This Book Is Not About A note of caution: many investors approaching the subject of apocalyptic investing will assume right away that the best way to play an impending cataclysm is by shorting relevant stocks Sorry to disappoint you, but we not advocate any short selling as part of event-based investing We believe short selling is one of the most dangerous tactics that can be undertaken by investors, and that belief is based on both logic and experience: We have seen too many seemingly knowledgeable traders and investors wiped out by trying to profit from decline Despite our title, this book also isn’t about gloom and doom Quite the contrary It is about hope and optimism and the fruits of innovation Consider that two of the great sources of both human misery and human progress have been war and disease Technologies created or improved by the military working with private enterprise—jet engines, satellites, and the Internet, for example—have given us the benefit of global travel, an unprecedented ability to communicate with one another, and easy access to unimaginable amounts of information The quest to overcome disease has given us longer life spans, better health, and incredible gains in human productivity Many people despaired at the prospect of war or epidemics, but others took up the challenges and created products and processes that preserved democracy and lives We fully expect to be chastised by some for seeking profits in disaster, but we believe that one of the preeminent messages of capitalism is, “We solve problems.” How to Use This Book While we intend this volume to be instructive and informative, we also want it to be a compelling read Many of the potential events we use to teach the lessons of Investing in the Apocalypse involve scientific complexity We will use anecdotes and illustrations and a well-honed ability to present complex subjects in layman’s language to make clear what is at the root of each potential calamity Where controversy exists, we will present both sides of the argument while nevertheless taking the side that we believe makes the most sense But one of the major lessons we teach in this book is that it isn’t simply what you think or know that creates an investment opportunity, it is what the vast majority thinks or thinks they know Understanding mass perceptions of events is crucial to finding opportunity where others see hazard The first chapter presents basic information about the history of cataclysms and markets and the fundamentals of investing that form the foundation for our analysis of specific threats to civilization The history of the human race has seen countless disasters, including the Black Death and many other pandemics; untold numbers of wars and genocides that took hundreds of millions of lives; and devastating earthquakes, tsunamis, floods, and droughts Yet human ingenuity and ambition have overcome them all, and the human race continues to progress and prosper After that beginning we introduce each of the specific threats, one chapter at a time After explaining what is known and what is debatable in each threat we move to the investment opportunities We acknowledge that some investors are more conservative than others The more conservative you are, the smaller the portion of your overall portfolio should be devoted to apocalyptic themes We will, where feasible, suggest company names as long-term plays— GlaxoSmithKline, for instance, is a solid long-term bet to profit from pandemics—or for illustrative purposes But for the most part the companies we name will be representative of the kinds of stocks one should examine, such as manufacturers of various energy-efficient products that contribute to the effort to slow perceived global warming And while we not advocate short selling, we will point out areas to avoid, such as the airlines and big-box retailers that would suffer in the event of a largescale pandemic that prompts people to avoid direct contact with others We hope you find Investing in the Apocalypse illuminating rather than frightening, optimistic rather than pessimistic, and, ultimately, both useful and entertaining ONE AN ILL WIND The Fundamentals of Apocalyptic Investing IT WAS A BEAUTIFUL fall day in Dallas Men, women, and children were gathered on the plaza to watch the president’s motorcade pass As the big Cadillac convertible wheeled through Dealey Plaza and turned onto Elm Street, John F Kennedy flashed his emblematic grin and raised his right hand to wave As he did the pop, pop, pop of gunfire rang out Kennedy clutched his fists around his head and neck and rolled to his left, shot through the back by the first bullet The second bullet struck his head, delivering the fatal blow The world’s most vibrant and powerful leader, the man who had faced down the Soviet Union in Cuba, whose attractive and elegant family had turned Washington into Camelot during his brief tenure, was dead The entire world was stunned The Cold War was still raging and some thought the assassination might touch off a global nuclear war But mostly the reaction was one of a shared tragedy People wept openly in public Traffic came to a standstill as people tuned in to news broadcasts Schools were closed, businesses shut early Even those people who were only seven or eight years old at the time—and barely old enough to be cognizant of the event—still remember what they were doing when they heard the news The news of Kennedy’s death hit the floor of the New York Stock Exchange within minutes of the event The uncertainty of what lay ahead for the nation in the wake of the assassination sent the Dow Jones Industrial Average down 3% that day—a “minicrash” but still a remarkable drop given the lack of volatility in the stock market in the early 1960s Yet two trading days later, with a new president sworn in and the alleged assassin captured, the market regained the losses that resulted from Kennedy’s death and a five-year bull market began Optimism had yet again won the day We are at heart a nation of optimists, although you wouldn’t know that by talking to people, reading the newspapers or blogs, or watching much that appears on television In the media it’s gloom and doom 24/7, and most people would rather complain than compliment Yet a brief tour through American history over the past century with a focus on some of most disturbing events reveals a markedly different story told through the stock market, one of the best barometers for our collective sense of the future It is the story of resilience in the face of disaster CRISIS AND THE FINANCIAL MARKETS: A BRIEF HISTORY THE GREAT DEPRESSION AND WORLD WAR II The worst economic crisis that the United States has faced was the Great Depression We all know the scenes of misery: the poverty-stricken farm woman clutching her child clad in rags, the camps of migrant farmers, and the bread lines and soup kitchens Millions were unemployed for years, and millions more lost their life savings Then came World War II and the massive effort to save the world from Nazi domination The war itself corrected the unemployment problem and jump-started moribund industries, including steel, autos (which turned its factories to making tanks and bombers), shipbuilding, and chemicals The Dow Jones Industrial Average, which had hit a low of 41.22 in 1932, ended World War II at 191.98 Two of what might have been the ultimate disasters—economic depression and war—in reality set the stage for unbelievable opportunities THE THREAT OF NUCLEAR WAR Even as economic growth swelled in the 1950s a new specter arose: the threat of globally devastating nuclear war with the Soviet Union And we came frighteningly close to suffering the consequences in the fall of 1962 when U.S spy planes discovered Russian missiles in Cuba The Cuban Missile Crisis and the prospect of nuclear incineration sent the Standard & Poor’s 500 Index plunging Yet less than a month after the announcement of the missiles the S&P was in record territory THE ARAB OIL EMBARGO Much of our economic growth after World War II was fueled by cheap oil But in 1973 the nations that exported all that oil decided to push for much higher prices and ultimately embargoed shipments of oil to the United States, touching off panic among people who were accustomed to filling their gas tanks with twenty-cents-a-gallon gasoline Coupled with the breakout of war in the Middle East, a severe recession triggered by raging inflation, and the scandal of a U.S president caught in criminal conduct, this oil crisis dealt our spirits a hard blow and stock prices reflected it In January 1973, the Dow Jones Industrial Average reached a high of 1067 before plunging over the next two years to a low of 570 in December 1974, not to regain its former glory until 1982 This lost decade was similar to what we are experiencing now THE SOUTH AMERICAN DEBT CRISIS In 1982 our largest trading partners were Mexico and some of the larger countries in South America The eight largest U.S banks had loaned 260% of their capital to those countries, more than is currently on loan to Europe Then in rough order Mexico, Brazil, Argentina, Chile, and several other South American countries defaulted on their debts They didn’t just threaten to default to gain leverage with the banks; they actually failed to pay notes when due Coming as they did on the heels of the worst U.S recession since World War II, those defaults threatened to undermine the global economy But the U.S government formulated a plan to bail out those countries through a restructuring of their debts, and the plan worked The stock market rose an astounding 49% in 1982 and 1983 THE 1987 MARKET CRASH Banks and government officials had realized that Mexico, Brazil, and Argentina were headed for trouble long before the defaults occurred and so were at least psychologically prepared for problems But on October 19, 1987, no one was prepared for the Dow Jones Industrial Average to plunge 27% in a single day amid a cascade of computer-generated selling But we did have a for financial collapse, 150–53, 162 for global warming, 161 for oil crises, 78, 160 for pandemics, 39, 42–46, 159 for terrorism, 111–16, 161 for water shortages, 23, 56, 160 General Electric (GE) and full-disclosure statement, xx and Invision acquisition, 42 and terrorist attacks, 110 and water demand, 56, 157 GeoEye (GEOY), 115 geothermal power, 83 Germany, 86 Gilead Sciences (GILD), 40 GlaxoSmithKline (GLX) as back-door investment, 22–23 as long-term investment, xxiii medical research of, 156 and swine flu vaccine, 40–41 Glen Canyon Dam, 52 global warming, 79–93 and alternative energy, 82–83, 85–89 and apocalyptic investing principles, 161 back-door strategies for, 161 debate on, 79–80, 86 as economic event, xviii and emissions, 80, 89–90, 92 and energy efficiency, 83–84, 90–93 fading the fear of, 84 front-door strategies for, 161 and greenhouse gases, 81–82 investment implications of, 84–93 and oil demand, 67–68, 82 and record heat of 2010, 155 science of, 80–82 strategies for managing, 82–84 and timing, 24 and water shortages, xix, 51 worry of public about, 85, 85–86 goals in investing, 14–15 Goldman Sachs, 140 Google, 104, 146 Google Earth, 115 Google Trends on global warming, 85, 85 and tracking fear trends, 44–45, 45 Great Depression as economic event, xvii Great Depression (continued) and fears for capitalism, 133 and Great Financial Collapse of 2008, 137 opportunities afforded by, Great Financial Collapse of 2008 and apocalyptic investing, 10–11 cause of, 135–45 and derivative trading, 149 and fade-the-fear principle, 19–20 and global warming, 85–86 and oil demand, 67 and personal savings rate, 143–44, 144 and stimulus package, 143, 147, 148 as threat to capitalism, 133, 134–35 Great Recession of 2008–9, 6–7 greenhouse gases, 81–82 GridNet, 91 Gulf of Mexico oil spill and difficulty of deepwater drilling, 65 explosion precipitating, 61–63 investment opportunities of, 16 and limited oil supply, 63 and policy on oil exploration, 68, 72 public reaction to, 90 and second rig explosion, 155 Harvard-Smithsonian Center for Astrophysics, 117–18 H5N1 virus scenario, 27–34 high-tension wires, 83–84 highway spending, 147, 149 history of financial crises, 3–7 Honda, 92 H1N1 virus fear generated by, 36–37 and front-door strategies, 43–44 irrational responses to, 20 scope of problem, 36 and trend tracking, 44–45, 45 vaccine for, 41 Hong Kong, 35, 37–38, 38 Hoover Dam, 52–53 household water consumption, 49 housing See real estate market hybrid vehicles and battery technology, 90, 92–93 and gas prices, 67 and oil conservation, 71, 83 hydropower, 49, 82 hyperinflation, 150 identity theft, 104 Idex Corp (IEX), 59 index funds and author’s investment approach, 8–9 CSFB Dedicated Shortsellers Index, 17 S&P Dividend Aristocrats index, 73, 74, 75, 75 and terrorist attacks, 108–9 See also Standard & Poor’s 500 index India and oil demand, 70 space program of, 127 and swine flu pandemic, 36–37 industry and oil demand, 66, 68, 70 and water demand, 49, 54, 55 and weakening dollar, 143 inflation, 4, 138, 150 infrastructure, 153 energy infrastructure, 83–84, 148 highway infrastructure, 147, 149 and stimulus money, 146, 147, 148 water infrastructure, 23, 50, 51, 55–56 initial public offerings (IPOs) boom, 138 innovation, 146 Insituform (INSU), 59 Intel, 91 Intercontinental Exchange (ICE), 149 interest rates, 146, 147 international markets, 37–38, 38 International Monetary Fund (IMF), Internet, 104–5, 114 investing principles (basic), 13–18 achieving diversification, 13–14 assessing management of companies, 15 avoiding short selling, 16–18 dealing with surprises, 16 setting investment goals, 14–15 Invision, 42, 110, 111–12 IPO boom, 138 Iran, 64 Iraq, 64 irrationality in markets, Itron (ITRI), 91–92 Ivins, Bruce, 102 Jacobs Engineering (JEC), 56–57 Japan, 127 Jet Propulsion Laboratory, 118 J.P Morgan, 106, 140 Kennedy, John F., 1–2 KISS investing approach, Kowalski, Richard, 117, 119 Kuwait, 64 Lake Mead, 52–53 Lake Powell, 52 Las Vegas, 52–53 Lehman Brothers, 10, 105–6, 134,140–41 Lender Processing Services (LPS), 151 leverage buying, 109 Lindsay Corporation (LNN), 148 liquid filtration systems, 57 local consumption emphasis, 72 Lockheed-Martin (LMT), 110, 111, 130 London rail system attack, 108 L-1 Identity Solutions (ID), 115 long-term investing, xix Magna International (MGA), 89–90 management of companies, 15 manufacturing, 54, 143 market asteroids, 129, 156, 157 mass transit, 71–72 MasTec, 148 McVeigh, Timothy, 97 media-driven fear and pessimism, 2,128–29,156 meteorites, 119 See also asteroids methane capture technologies, 83 Mexico, mid-cap stocks, Middle East oil in, 64, 69 turmoil in, 4, 72 Milken, Michael, 138 Minor Planet Center, 117–18 money market funds, 9, 14, 141 monitoring technologies, 112–13, 114 Monsanto, 59 Morgan Stanley, 140 mortgage-backed securities (MBS),136, 139–40 mortgage crisis, 138–39 Mueller Water Products (MWA), 59 Nalco (NLC), 56 NASA (National Aeronautics and Space Administration), 118 Nasdaq (NDAQ), 17, 149, 152, 152–53 natural gas, 71 near Earth objects (NEOs) Asteroid 2008 TC3, 117–19 and media-driven fear, 128 potential for collisions with, 120,123–24 See also asteroids Nevada, 52–53 New Delhi, 50 New York City, 98–99, 103 New York Stock Exchange (NYX), 2, 149 New Zealand, 155 NICE systems (NICE), 113 9/11 terrorist attacks economic effects of, fear generated by, 95–96 investment implications of, 107–8 perspective on, 97 and short selling, 17 1987 market crash, 4–5 Nixon, Richard, Noble Corp (NE), 78 North Korea, 99–100, 155 Northrop Grumman (NOC), 130–31 North Sea, 65 Novartis, 41 nuclear power, 82–83, 87–88 nuclear threat, 3, 98–101 Nucor Steel (NUE), 148 Obama, Barack, 68 offshore drilling, 63, 65, 72–73 oil and oil crises, 61–78 and alternative energy, 76, 82–83 and apocalyptic investing principles, 160 Arab oil embargo, 3–4 back-door strategies for, 56,76–77, 160 and climate change, 67–68, 82 consequences of, 72 demand for oil, 66, 69–70 and East Coast oil exploration, 68 extraction of oil, 65–66, 67 fading the fear of, 73–75, 74, 75 front-door strategies for, 78, 160 Gulf of Mexico oil spill, 16, 61–63,65, 68, 72, 90 history of oil exploration, 63–64 investment implications of, 72–78 offshore drilling, 63, 65, 72–73 oil shock of 1973, 68–69 peak oil, 16, 66, 67, 68–70 price of oil, 66–67, 68, 71–72 sources of oil, 64–65 and timing, 24 waste from oil, 89 Oklahoma City bombing, 97 OM Group (OMG), 90 opportunistic investing, 7–8 optimism, options, xix Orbital Sciences (ORB), 131 Orbit International (ORBT), 131 Organization of the Petroleum Exporting Countries (OPEC), 64, 68 OSI Systems (OSIS), 115 Otter Tail (OTTR), 77, 87 Pakistan, 99–100, 155 pandemics, 27–46 and apocalyptic investing principles, 22–23, 159 back-door strategies for, xxiii, 39–41, 159 as economic event, xviii fading the fear of, 35–38, 159 fear generated by, xviii front-door strategies for, 39,42–46, 159 H1N1 virus, 20, 36–37, 41, 43–45, 45 investment implications of, 34–46 perspective on, 156 predictions about, 35 scenario, 27–34 and timing, 24 Paulson, Hank, 135 pawnshops, 151 peak oil, 16, 66, 67, 68–70 See also oil and oil crises Pennsylvanian oil seep, 63–64 pharmaceutical industry, 39–40 PharmAthene (PIP), 115 Philadelphia Suburban (PSC), 60 Pickens, T Boone, 69, 71, 87 Pimentel, David, 53 pollution, 49, 71 population growth and oil demand, 66, 70 and water demand, 54 pork industry, 20 Portfolio Recovery Associates (PRAA), 151 power grid and cyberterrorism, 106–7 price drops in stocks, 21, 129–30, 156 principles of apocalyptic investing, 18–25 applying, 24–25 back-door strategies for, 22–23,157–58 fading the fear, 19–21, 157 front-door strategies for, 23, 158 Prius hybrid car, 67, 83 progress, xxi public works projects, 146 Rajneeshee cult, 102 Raytheon (RTN), 130 Reagan, Ronald, 138 real estate market and bubble-bust cycle, 9–10, 145 demand for, 147 and Great Financial Collapse of 2008, 6–7, 138–40 and related software companies, 151 reforms, financial, 148–49 Relenza, 40 retirement investing, 15 Ridley, Matt, 92 risk, xxii–xxiii, 14, 15 Roche, 40 Russia and meteorite of 1917, 119 nuclear program of, 82, 99,100–101 and record heat of 2010, 155 space program of, 127 safe havens, 14 St Louis Federal Reserve, 144 S&P 500 See Standard & Poor’s 500 index SanofiAventis, 41 SARS outbreak, 35–36 Saudi Arabia, 64 savings rate, personal, 143–44, 144 Securities and Exchange Commission (SEC), 148 September 11 terrorist attacks economic effects of, fear generated by, 95–96 investment implications of, 107–8 perspective on, 97 and short selling, 17 sewage, 50, 51 short selling, xx–xxi, xxiii, 16–18,152–53 small-cap stocks, smart grid technology, 90–92 Smithfield Foods (SFD), 20 solar energy, 82, 86 South American debt crisis, South Korea, 155 Southwest Water Company (SWWC), 60 Soviet Union, 3, 103 Spain, 86 speculative bets, 23, 42 Spindletop oil gusher, 64, 65 Spyders Exchange Traded Fund (SPY), 37 Standard & Poor’s 500 index and Cuban Missile Crisis, Dividend Aristocrats Index compared to, 73, 75, 75 and Spyders Exchange Traded Fund (SPY), 37 and terrorist attacks, 6, 108, 108 3% drops in, 21 Standard & Poor’s Dividend Aristocrats Index, 73, 74, 75, 75 stimulus money expectations for, 143 and infrastructure projects, 146,147, 148 and investment opportunities, 147,148, 153 stocks and apocalyptic investing principles, 157–58 and diversification, 13–14 and fading the fear, 21 opportunities in, 13–14, 37 and pandemics, 42 price drops in, 21, 129–30, 156 suggestions on, xx subsidies, 86–87 suburbs and suburban lifestyle, 71–72, 137 surveillance and monitoring, 112–13, 114 swine flu (H1N1 virus) fear generated by, 36–37 and front-door strategies, 43–44 irrational responses to, 20 scope of problem, 36 and trend tracking, 44–45, 45 vaccine for, 41 Tamiflu, 40 technologies, 25, 54–55 terrorism, 95–116 and apocalyptic investing principles, 161 back-door strategies for, 110, 161 bioterrorism, 101–3 cyberterrorism, 104–7 domestic terrorism, 97 fading the fear of, 108–9 fear generated by, xviii, 95–98 front-door strategies for, 111–16, 161 investment implications of, 107–16 9/11 attacks, 6, 17, 95–96, 97, 107–8 nuclear terrorism, 98–101 perspective on, 97–98 and short selling, 17 and timing, 24 Tesla (TSLA), 92 Texas, 64, 65 Thailand, Third World nations, 47–48, 72 tidal power, 83 Times Square bomb scare, 111 timing of investments, 24 Toyota, 67, 83, 92 trade, foreign, 139, 143 Transocean (RIG) and deepwater drilling policy, 72 explosion and oil spill, 61–63 as front-door investment, 78 investment opportunities in, 16 and limited oil supply, 63 travel and pandemics, 32, 34 Treasury bonds, trends, tracking, 44–45 tsunamis, 122 two-income family model, 137, 138 Tyco (TYC), 17, 110 unemployment, 134, 147 United Nations, 48, 54 urban areas, 54 U.S Department of Defense, 104 U.S Department of Energy, 77, 87 U.S Federal Aviation Administration, 104, 105 U.S Federal Reserve creation of, 148 and cyberterrorism, 104,105–6 and housing demand, 138, 147 utilities, 60, 77 vaccines, 39, 41, 42 Venezuela, 64 venture capitalists, 145–46 VeriSign (VRSN), 114 Vical Inc (VICL), 43–44, 44 video cameras, 112–13 VitaminWater, 60 VMware (VMW), 116 volatility of markets, 14 Wang Jianwei, 106–7 war, xxi, Washington, D.C., 98–99 water demand and shortages, 47–60 and apocalyptic investing principles, 160 water demand and shortages (continued) back-door strategies for, 56–57, 59,60, 160 fear generated by, xviii front-door strategies for, 23, 56,160 and global warming, xix, 51 investment implications of, 54–60 perspective on, 156–57 and price of water, 59–60 scope of issues, 47–51 water cycle, 51–54 water infrastructure, 23, 50, 51,55–56 Websense (WBSN), 114 wells, water, 53 Wells Fargo, 142 wind power, 76–77, 82, 87 WorldCom, 17, 146 World Health Organization, 36 World War II as economic event, xvii, and Great Financial Collapse of 2008, 137 as threat to capitalism, 133 Zhongpin (HOGS), 20 About the Authors Entrepreneur, investor, writer, and media personality JAMES ALTUCHER is a frequent contributor to The Wall Street Journal, the Financial Times, and other media outlets, and he appears regularly on CNBC, Fox Business, and CNN Radio He is the author of four books, including Trade Like a Hedge Fund and The Forever Portfolio DOUGLAS R SEASE was a reporter and editor for The Wall Street Journal for twenty-six years He is the author of five books on investing and tax policy and has edited or ghostwritten more than a dozen books on management, finance, government, and foreign business Visit www.AuthorTracker.com for exclusive information on your favorite HarperCollins author Credits Cover design by Robin Bilardello Copyright The Wall Street Journal® is a registered trademark of Dow Jones and is used by permission of Dow Jones This book is written as a source of information only, and the information contained in it should not be considered a substitute for the advice, decisions, or judgment of the reader’s professional advisors Each investor’s situation is different, and readers are encouraged to seek professional advice before making any investment decisions Copyright © 2011 by Dow Jones and Company All rights reserved under International and Pan-American Copyright Conventions By payment of the required fees, you have been granted the non-exclusive, non-transferable right to access and read the text of this e-book on-screen No part of this text may be reproduced, transmitted, down-loaded, decompiled, reverse engineered, or stored in or introduced into any information storage and retrieval system, in any form or by any means, whether electronic or mechanical, now known or hereinafter invented, without the express written permission of HarperCollins e-books THE WALL STREET JOURNAL GUIDE TO INVESTING IN THE APOCALYPSE FIRST EDITION Library of Congress Cataloging-in-Publication Data is available upon request EPub Edition © January 2011 ISBN: 978-0-06-208540-5 10 About the Publisher Australia HarperCollins Publishers (Australia) Pty Ltd 25 Ryde Road (PO Box 321) Pymble, NSW 2073, Australia http://www.harpercollinsebooks.com.au Canada HarperCollins Canada Bloor Street East - 20th Floor Toronto, ON, M4W, 1A8, Canada http://www.harpercollinsebooks.ca New Zealand HarperCollinsPublishers (New Zealand) Limited P.O Box Auckland, New Zealand http://www.harpercollinsebooks.co.nz United Kingdom HarperCollins Publishers Ltd 77-85 Fulham Palace Road London, W6 8JB, UK http://www.harpercollinsebooks.co.uk United States HarperCollins Publishers Inc 10 East 53rd Street New York, NY 10022 http://www.harpercollinsebooks.com ... Street Journal Guide to Investing in the Apocalypse we want to help you think about these unthinkable events, defend your financial life against their consequences, and maybe even emerge in better... of the possibility that it won’t occur or that the consequences will not be as fearsome as others predict In The Wall Street Journal Guide to Investing in the Apocalypse we purposely push the. .. investing may enhance their returns through the use of options The difference between this and other investing books is that we offer a way to think about investing that, while using simple tools,