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Vice Stock Investing

Written By Brian Hicks

Posted August 16, 2008

Editor’s Note:

Options Trading Pit Has Launched

With the fall of the UK economy, subprime, Alt-A, and banking institutions, the major breakdown of the Dow… and my latest predictions of US and global economies spiraling out of control, the markets in the coming months will offer some incredible investment opportunities.

While some of you may know me from past options trading services, my 4,500% cumulative gains of 2007, and gains such as these…

  • Fremont General September 2007 12.50 puts – 291% in 16 days
  • Lennar January 2008 25 puts – 279% in 40 days
  • Pulte January 2008 15 puts – 224% in 40 days
  • New Century January 2008 25 puts – 214% in 16 days
  • Centex January 2008 25 puts – 207% in 40 days
  • Countrywide January 2008 27.50 puts – 203% in 69 days
  • Thornburg October 20 2007 puts – 188% in 6 days
  • MGIC Investments December 35 puts – 175% in 80 days
  • Capital One January 2008 65 puts – 160% in 59 days
  • Accredited Home September 2007 7.50 puts – 141% in 4 days
  • Hovnanian November 2007 17.50 puts – 136% in 13 days
  • Radian Group August 2007 60 puts – 122% in 19 days
  • Standard Pacific September 2007 15 puts – 111% in 2 days
  • Autonation January 2008 20 puts – 105% in 49 days
  • New Century January 2008 25 puts – 89% in 1 day

…we’ve decided to launch Options Trading Pit, looking to profit from the market’s demise as well as its upside.

But know this… We’re not your typical options trading letter. We use an aggressive trading approach… taking gains in as little as days to months using options and LEAPS to fully maximize gains.

Just ask yourself… Will you have a problem profiting as others suffer? And will you have a problem raking in profits from oversold gems?

If the answers are no… click here for more.

Today’s Wealth Daily: How to Protect Your Portfolio

Impressive market rallies aside, they don’t mean that the U.S. recession or bear market has been called off… not yet anyway.

You see, not only do wild rallies happen during bear markets they are actually a defining aspect of bear market. Take a look at the Dow since the downside slide began in 2007 and you’ll see a few triple-digit upside moves in a day.

Then, take a look at the five-year bull market that preceded our bear market, and you won’t find many of the same triple-digit gains in a day… In fact, they were just about non-existent.

While it’s likely we’ll see more triple-digit gain days, we’re still in a bear market… and things may only get worse. According to the Pew Research Center:

  • Between February and August 2008, the number of Americans that put inflation at the top of the "worry" list grew by 47%,
  • Two-thirds of the sample population said incomes were falling behind living costs,
  • 72% of the sample believes we’re already in a recession.
  • 38% said they were having problems pulling together enough money for food cost

Yep, by now, most investors know that our economy is in real trouble.

Thanks to housing, energy, financial, and unemployment fiascos, the White House lowered its economic growth forecast this year and for 2009. For 2008, 1.6%, as compared to February’s 2.7% projection is expected. For 2009, growth of 2.2% versus 3% growth rates is expected.

Says the Associated Press, "The U.S. economy has continued to expand, but growth has slowed as a result of the sharp housing decline, disruptions in financial markets and high energy prices," the administration said. "Because of the recent slower economic growth, the labor market is likely to remain sluggish for a period of time before returning to better performance," the White House budget office said.

But the news comes as no surprise.

It’s just building on prior bad news of doubling oil prices, skyrocketing gold, a severely battered dollar, the sub-prime and credit crash, six consecutive rate cuts, and a domino effect of falling banks. Oh, and let’s not forget about inflation, which which is rising at its fastest pace in 17 years.

But what most investors are unaware of is that throughout history, especially in recessionary environments, a select group of ignored stocks start to rally.

And they rally because, as a recession looms, there’s no better way to feel better than to eat, drink and be merry.

Even with soaring energy costs, higher food costs, and troubled mortgages, folks are not prepared to relinquish some of their pleasures… including alcohol and cigarettes. It’s a trend well-echoed in stronger financials from so-called "sin stocks."

Anheuser-Busch, for example, turned a profit despite fears of rising costs for glass, barley, wheat and even fuel. And it’s so confident that sales won’t diminish that it has plans to up prices for popular brands.

Diageo PLC believes that its brands, including Johnnie Walker whiskey, Smirnoff Vodka and Captain Morgan Rum won’t be given up, even in an economic breakdown. Diageo even expects its Scotch whiskey business to grow another eight to nine percent annually, thanks to stronger global demand.

Even tobacco companies are doing okay. Philip Morris just reported that earnings rose 23% in Q2 and raised their earnings forecast for the year, saying it wasn’t affected by inflation.

That’s just to name a few.

During the Dot-com crash starting in March of 2000, for example, while the NASDAQ took its historic 70% plunge and the Dow tanked 14%, certain vice stocks started to take off. The Standard & Poor’s Casinos and Gaming index, for example, gained 115%, while the S&P 500-stock index plunged 47%. Shares of tobacco giant Altria (then known as Philip Morris) more than doubled, and the stock of Anheuser-Busch, the largest U.S. brewer, skyrocketed 87%.

The best part – we’re not investing in risky or wildcatter companies. We’re investing in thriving, well-established businesses.

Here’s a gaming stock during the Dot-com era that pulled in almost 400% gains as people sought the dream of "fast" cash…


Vice Stock Performance

That’s just an example of one stock fueled by tough economic times.

We’ll get into more examples, and which stocks to play shortly. Stay tuned to SC Trading Pit for more.

Good Investing,

Ian L. Cooper