Friday, March 19, 2010

How to Trade Political Correctness

Great advice from Doug Casey:
Well, politically incorrect areas always offer opportunities. Tobacco stocks have high yields. And I don't think government will kill the industry since it cranks out so much in taxes. Gun manufacturers are also cheap. One of the more fun trades I made years ago was to short Ben & Jerry's Ice Cream, which was very overpriced because they were so fashionably lefty, against long Ruger. My rationale was to be market neutral by being long and short simultaneously. It was a huge win on both sides of the trade.
Another great trade is to buy into sectors where prohibitions have been eliminated. Start-up airline stocks showed huge gains after airline deregulation during the Jimmy Carter presidency. Southwest Airlines stock climbed for years after it figured out a way around the laws that prohibited flights from Dallas' Luv Field to cities outside Texas.

Gaming stocks soared after gambling was made legal in Atlantic City.

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