Trying to Profit from Economic Disaster

A couple weeks ago, I was getting depressed about the high probability of another economic disaster.  Given government spending/stimulus is unsustainable, the likelihood of a Greek default, the looming debt ceiling issue and the lack of business growth, I expect another financial crisis and significant stock market decline.  To me, it feels a lot like 2008, although many pundits claim it won't be.

To me, even if actions are taken against the issues I've identified, I don't see any benefit to the economy in the short term.  In fact, I think the market has already priced in most of the possible solutions, making a market drop likely once the event happens.

Here's our situation.  I've already sold out of the majority (95%)  of our stock holdings, except for stock in my company's retirement account.    However, I still have a significant amount of equity in employee stock options, which I am hesitant to sell at this time because there is still one to six years before expiration. The value is equal to about 25% of our retirement and savings accounts. This decision may prove to a major error if the market declines significantly and doesn't recover by 2014.   Hence, the reason for my worry and depression.

However, this time, unlike in 2008, I will attempt to profit from an economic disaster.   (I know, it sounds like I'm advertising for a doom and gloom book :-)    I've started to short stocks, in particular those that I feel will be the weakest in a declining economy.  In addition, I will make a list of stock I plan to buy if the market should drop 20-30%. 
 
For more on New Beginnings, check back every Sunday for a new segment.

This is not financial or investing advice. Please consult a professional advisor.


Copyright © 2011 Achievement Catalyst, LLC