How to invest for the "end of the world"

James Altucher and Douglas R. Sease are out with a great new book, The Wall Street Journal Guide to Investing in the Apocalypse.

In the book, they claim that a lot of doomsday threats are over-hyped, from pandemics to terrorist nuclear threats. I agree. Their basic thesis is that you should ignore the emotional hype, analyze the situation for what it is and make some money from it. They call it "event based investing".

I am partial to this type of investing and I think it provides great opportunities for profit. The book is a great introduction on how to become such an "event based" investor. Beyond this becoming an event based investor, the book can be of value to the person simply holding a mutual fund portfolio. By understanding how things are hyped, it may prevent an investor from selling out of mutual funds in panic, at just the wrong time.

But, most of all the book is a well researched handbook on the major potential panics of our time and the reality of what really is likely to happen and what is not. For example, with regard to terrorist attacks in the U.S., Attucher and Sease tell us that it is easy to underestimate the difficulty of building a nuclear weapon, and that it is inconceivable that a group of terrorists hiding in caves could even begin to understand where to start.

Even a "dirty bomb" would be difficult to assemble, they tell us.

As for cyber-terror, they say hacking is one thing, but that it would take an extremely powerful computer with very detailed knowledge to take down a major institution.

Bottom line, they write: "While terrorist attacks aren't likely to be either pervasive or persistent, our fear of terrorism is both pervasive and persistent. In that disconnect lies opportunity."

In addition to pooh poohing, threats that aren't likely to develop, Altucher and Sease teach us how to keep real disasters into perspective and not always view them as world ending events. From fear over flu viruses to asteroids flying towards the earth, they teach us how to "fade the fear", how to invest through the front door and back door.

My only quarrel with the book is the clear lack of understanding by Altucher and Sease of the business cycle and what causes it. In their short bursts of discussing economic downturns, it's clear they hold a pedestrian Keynesian view of what causes the cycle. At one point, they write: "Inflation is not necessarily a bad thing." Like I said, the book is well researched, but I do wish the authors had spent time in research at Mises.org to polish up their understanding of the business cycle, so that it would have been on a par with the rest of the book.

That said, the book should be read by every investor. It will help in keeping investors from panicking and it will help those with independent minds to lean how to event trade. The book generally discusses the major panics that could occur but the authors also briefly refer to "mini-asteroids", which are panic situations that are not global in nature, such as the recent events in Libya, but are of enough of a concern that investment opportunities exist.

Thus, for the wannabe event trader, the book should be read, to get the general sense of how to trade full blown panics and "mini-asteroids". It also should be kept near all investors desks to be pulled out whenever one of the biggie panics hits the market, since the relevant panic-related chapter will help calm the nerves and will also provide specific stock trades that may make sense to implement.

And don't miss the chapter on asteroids. I'm tempted to say the chapter is earth shattering, but in the chapter, the authors tell us that a biggie asteroid is heading toward earth, which astronomers are tracking and they expect it to pass very near earth on Friday April 13, 2029. But cool cats that Altucher and Sease are, they tells us why you should not panic, how to fade any asteroid fear that may develop, and list specific front door and back door stocks to invest in should panic develop.