How To Trade The Apocalypse

We saw weaker than expected durable good orders for June this morning, renewed concerns over the debt ceiling here in the United States, problems in Europe and everything else imaginable. In other words, it's just a typical Wednesday in the equity markets it seems. June durable goods came in at -2.1% versus estimates of 0.3%. Excluding transportation orders, economists were expecting a reading of 0.5%. It came in at 0.1%, well below expectations. As such, gold surged to a new record this morning, over $1,626 an ounce. It currently is sitting at $1,620.10 an ounce, up $3.30 for the day. Silver is hovering around $41, and platinum and palladium are also moving higher as well. This is what is known as the "fear trade," where everyone gets out of paper assets and moves into hard assets. Guns, bullets, canned goods, etc. I like to call it the "Apocalypse trade." We are getting dangerously close to a credit downgrade from one of the ratings agencies, and a potential default of U.S. debt if a deal is not done by August 2. In recent days, we have seen the markets start to price in an eventual credit downgrade from AAA to AA, or perhaps even lower. We HAVE not seen a pricing in the of the Apocalypse, which is essentially what happened when Congress nixed the TARP vote the first time. The Dow fell some 800 points and all hysteria broke loose. We are starting to see signs of a potential double-dip recession, especially if you look at the recent employment numbers. In June, just 18,000 jobs were created. That is nothing short of atrocious. Everyday, we get new news out of Washington or Europe telling us the Apocalypse is either on or off. Traders need to be prepared for the worst and hope for the best. Today, it looks like Apocalypse on, so adjust accordingly and put on your seat belts and get ready for a bumpy ride. ACTION ITEMS:

Bullish:
Traders who believe that Congress will come to save the day might want to consider the following trades:

• Go long everything. Buy the dips on high beta names like Baidu BIDU, Netflix NFLX and others. If and when Congress gets their act together, we will see a major relief rally.

• Also consider metals, as an increase in the debt ceiling is likely to hurt the U.S. dollar, which would inflate metals prices. Names like iShares Silver Trust ETF SLV, SPDR Gold Trust ETF GLD, Freeport-McMoRan Copper & Gold Inc. FCX and other commodity related names.

Bearish:
Traders who believe that an Apocalypse like outcome is likely may consider alternate positions:

• Go long canned goods, bullets, guns, bottled water and all things needed to survive.

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