End-of-the-World Trade

The “end-of-the-world trade” is a term used for an investment strategy that assumes the worst, such as war or the collapse of the dollar. People preparing for the “end-of-the-world” (or, at least, the end of the financial world of central banking and fiat money) might take their money out of stocks and out of banks and buy gold.
 
“The End-of-the-World Trade” was cited on the blog Marginalizing Morons on December 7, 2006. “End-of-the-World Trade” was the title of an article by Donald MacKenzie in the London Review of Books on May 8, 2008. The Reformed Broker blog published “Update: End-of-the-World Trade” on June 18, 2013; “end-of-the-world trade” people who bought gold had a horrendous year, but people who bought stocks had a great year.
   
 
Marginalizing Morons
Thursday, December 07, 2006
The End-of-the-World Trade
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The reason I write this post is that my trading positions at the moment look like I am predicting the end of the world.
 
Long gold and silver.
Long oil.
Short the Nasdaq.
Short the 30 year bond.
 
Of course, trades are inherently short-term; conceivably I could cover and reverse them all before lunch. But if oil exploded and the dollar collapsed, I’d make a small fortune. Frighteningly, these scenarios are two key ingredients in any viable End-of-the-World prediction.
 
London Review of Books
Vol. 30 No. 9 · 8 May 2008
pages 24-26 | 4837 words
End-of-the-World Trade
Donald MacKenzie
Last November, I spent several days in the skyscrapers of Canary Wharf, in banks’ headquarters in the City and in the pale wood and glass of a hedge fund’s St James’s office trying to understand the credit crisis that had erupted over the previous four months. I became intrigued by an oddity that I came to think of as the end-of-the-world trade. The trade is the purchase of insurance against what would in effect be the failure of the modern capitalist system. It would take a cataclysm – around a third of the leading investment-grade corporations in Europe or half those in North America going bankrupt and defaulting on their debt – for the insurance to be paid out.
 
iStockAnalyst
The End of the End-of-the-World Trade
September 04, 2008 02:46 AM
I’m stealing this phrase from Toro, but the “End of the World Trade” is essentially long any and all combinations of commodities, and short any and all combinations of financials and consumer discretionary (the latter sector constitutes the most heavily shorted stocks as a percentage of float by far – despite what the SEC might make you believe). It has been one of the dominant momentum trades of the last year, and its reversal in the last six weeks has had serious consequences because of how far the trade had been pressed.
 
EconoMonitor
You know it is a crisis when the trade deficit could have been financed just by selling t-bills to China and European banks
Author: Brad Setser ·  November 21st, 2008
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Of course, Treasuries aren’t entirely risk free. I don’t believe that there is a real risk the Treasury would default. Buying credit-default swap protection on the US is something by colleague Paul Swartz calls an end-of-the-world trade.
 
Reuters
Judgement Day trade: Sooner than you think?
By Chris Sanders
NEW YORK | Sat May 21, 2011 10:32pm IST
(Reuters) - How do you invest for the end of the world? A U.S. Christian radio network has been creating a stir with predictions an earthquake will shake the world on Saturday (May 21), sweeping the righteous to heaven and leaving others behind to be consumed in a ball of fire in October.
 
It left some on Wall Street on a relatively quiet day of trading to ponder the strategy to end all trading strategies.
 
“The end of the world trade is a sucker’s bet because if you’re right, well, your counterparties are dead and you have nobody to collect from, and if you’re wrong you owe a lot of money,” said Barry Ritholtz, CEO and director of equity research at Fusion IQ in New York.
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For some, the best proxy for an end of the world trade was the market meltdown during the financial crisis and Great Recession. Heck, an Internet search for “end of the world trade” brings up tons of links to the financial meltdown, and just a couple of mentions of May 21, 2011.
 
The Reformed Broker
Update: End-of-the-World Trade
Joshua M Brown
June 18th, 2013
How’s it going so far?
 
I’ve saved about three dozen atrociously allocated retirement portfolios in the last few years where gold holdings out-weighed productive assets (like stocks and bonds) by 2-to-1 or more. I’ve taken accounts away from every single hyper-inflationist and deflationist celebrity doomer you can name.  I consider it my sacred duty to rescue investors from the revival tents and carnival midways whenever possible. But I can’t save them all.
 
Business Insider
The ‘End-Of-The-World Trade’ Is Getting Annihilated Today
Joe Weisenthal
Jun. 26, 2013, 3:54 PM
Going long gold and shorting stocks. Josh Brown called it, aptly, the “End Of The World Trade” since that basically represents a belief that rocks are going to be more valuable, over time, than enterprises creating value.
 
Of course that trade has been getting crushed.
 
Gold has had a horrendous year and stocks remain near all-time highs.
 
And today it is a complete wreck.
 
Gold is down over 4%, while stocks are up over 1%.