Imitation, they say, is the sincerest form of flattery. So I wonder if Sean Brodrick, author of "The Ultimate Suburban Survivalist Guide," was flattered by yesterday's Wall Street Journal article, "Profiting from Disasters." In the Journal piece, reporter James Altucher hits on several of the potential disasters covered in Brodrick's book. Coincidence?
At least Altucher focuses mostly on stock picks instead of the commodities and ETFs discussed in Brodrick's book. In the event of a water shortage, Flowserve and Tetra Tech should do well, Altucher says, since they manufacture equipment for or design water treatment facilities. If a pandemic looms, two pharmaceuticals that may show vigor are vaccine developers GlaxoSmithKline and Sanofi-Aventis. Uranium refiner Cameco Corp. is a global warming play. And for the upcoming hurricane season, predicted to be particularly active, consider Campbell Soup, whose stock reacts favorably when food hoarders prepare for the storm.
Pick your crisis
Sean Brodrick, who is Weiss Research's small-caps and natural resources specialist, takes the subject of impending disaster much more seriously and to far greater lengths than does Altucher. The first part of his book focuses on the types of events that can turn our lives upside down: economic depression, natural disasters such as flood or fire, an oil or food crisis, climate change, shutdown of large portions of the U.S. energy grid due to hackers, civil unrest, terrorism, etc.
Personally, I'm concerned about the rapid disappearance of honeybee colonies, which will adversely impact crop yields. I heard the tail end of a radio show in which it was predicted that at the rate they're dying off, honeybees may be extinct by 2012. You know, 2012 -- the year of the apocalypse. The same year Nostradamus predicted the world would end. The year in which the "Long Count Calendar" of the Ancient Mayans ends. The very year Bankrate alludes to in a story about penalty-free 401(k) and IRA withdrawals.
OK, let me go on the record to say that I'm not really that spooked about the end of the world. But I am concerned about a possible upcoming food shortage.
Prepare for the worst
Regardless of the crisis, Brodrick says you have three options. You can ignore the problem, buy a goat farm or become a smart suburban survivalist. I was most interested in reading his investment tips, though the book delves far beyond investing into practical advice about which water purifiers to buy, how to store foods in bulk and cook without electricity, whether to buy a gun, sanitation considerations and, well, you get the picture. It's a survival guide.
So what type of investments do survivalists like? "Gold provides protection against a currency collapse or government collapse -- both of which we could experience in the next decade," writes Brodrick.
In your 401(k) plan, he says, you might stash half your money in the safest fund available (a money market fund) and the rest in a mix of precious metals, bonds, ETFs that track sectors or commodities, and U.S. and foreign stocks. "The hard truth is that the market changes constantly -- there is no one investment to fit all people all the time. And depending on market conditions and business and market cycles, there may be times when you want to put money to work."
My opinion: Since it's difficult, if not impossible, to predict whether or when a gloom-and-doom event may occur, 401(k) investors should probably stick to the investment plan in place, assuming they have one. You can also protect yourself in ordinary ways, by getting out of debt and getting sufficient insurance coverage.
Nevertheless, "The Ultimate Suburban Survivalist Guide" is a well-written eye-opener. You'll learn that there's a huge market out there with all types of gadgets for every imaginable calamity.
And if you're the type who likes to be prepared for anything, it's indispensable.
On a related subject: Have you changed your portfolio as a result of the recent financial crisis?