How to Make BIG Money in 2012 ?
~*~ In another essay, I wrote of 2010 and beyond and cited 9 serious financial events that will happen over the next few years – most of those will happen during and beyond 2012 – such as the retirement of the baby boomers. Some will happen before such as spending all of the ARRA money. Some time after 2012, the impact of all of those nine inevitable events will take the economy into a 10+ year depression. Go and read that other essay on 2010 and beyond and see if you do not agree.
~*~ But in this essay, I want to speak of just 2012. You know, the 2012 from the movie. The 2012 in which the world is going to literally be torn apart and all but a very few are going to die in multiple worldwide natural disasters. The 2012 that everyone from the Mayans to Nostradamus to the Oompa Loompas have predicted the end of time. December 21, 2012 is supposed to be the exact date of a global cataclysm of some kind. Perhaps war, perhaps collapse of the dollar, perhaps a meteor impact, or something worse. That 2012.
~*~ If you are one of the space cadets with a tinfoil hat that thinks all this is really going to happen, then perhaps you should not read this essay because I am going to tell you that it is all just a bunch of lies and hype mostly fanned by Hollywood to promote a movie and by various news media because stories of disaster and doom sell better than stories of good news because nothing is going to happen. First let me tell you about the real 2012:
~*~ There is a very good coverage of the 2012 phenomenon in Wikipedia that covers this subject quite well and points out that it is all a bunch of fictional stories, misunderstandings and deliberate deceptions on the part of numerous self-appointed prophets and profiteers. I’m not going to repeat those arguments or factual rebuttals except to say that for any reasonably intelligent person, it is clear that the whole 2012 scary scenario is all fake.
~*~ So why am I writing this? Because this is nearly a carbon copy of the whole Y2K scare of 1999 and it will play out almost exactly the same way. There will be enough space cadets and gullible people that think that this will happen that it will spook Wall Street into making a lot of “cover your ass” and “just-in-case” investments. The most common of these will be investment in gold. As in the Y2K event, gold will rise in price slowly going into 2012 and more dramatically as we approach December 2012. When the world does not die on that fateful date, people will sell off their gold and the price will drop rapidly in late December and into January 2013.
~*~ In keeping with the theme of this blog – “Event Investing - If you know an event is going to happen, you can profit by it”. This is a classic case of being able to make a profit from a very predictable event. Here’s how:
~*~ You must be really confident that the price of gold is going to go up as a result of 2012. If you are then you buy a call option in mid to late October 2012 for 120 days for 1000 or more ounces of gold at the going rate in August, let’s say it is $1,100 per ounce. Now you wait and watch the gold price increase as the 2012 sillyness approachs and there is an increasing degree of panic among investors. This option is not cheap. It might be as much as $2,500.
~*~ By the middle of December, the price of gold will probably go up to $1,350 or more per ounce. You can then decide to exercise your option. You buy 1000 ounces of gold at $1,100 and immediately sell it at $1,350. You keep the difference of $250,000 minus the cost of the option. You pocket a total of $247,500.
~*~ But you are not done yet.
~*~ You should also be very confident that the whole 2012 threat and its related investor panic will subside very quickly after December 2012 with a corresponding decrease in the price of gold. It has to! It is a mathematical certainty called regression to the mean.
~*~ So in late November, you buy another option. This one is a “put” option. By buying it will the price of gold is higher than you think it will be in January, you can buy a relatively cheap option. Your option is for 45 days for 1000 ounces or more at the then top gold price which is likely to be over $1,250 per ounce. If you want to be safe, get a 60 day option. This means that if you exercise your option, the broker will buy your gold at $1,250 per ounce. In this mythical scenario, because the time period is shorter, the cost of the option will be lower, perhaps $1,500.
~*~ Now you wait until the end of 45 days or so when the price of gold has dropped back to probably around $875 per ounce. You buy 1000 ounces at that price and then exercise your option to sell it at $1,250 per ounce. The difference of $375,000 minus the cost of the option, nets you $373,500.
~*~ Combined with your call option, you could have cleared $621,000 in less than 4 months. At no time did you have at risk more than $2,500 and you could have started with as little as $2,500 in cash. Of course, every option could have been for more ounces of gold and your real upper limit is much higher.
~*~ Had the price of gold not followed the current predictions, you were at risk for the first $2,500 call option but by early December 2012, you would see that the price of gold is not following the predicted trends and you would decide to not buy the second option.
~*~ In other words, you could have had a $621,000 upside and a $2,500 downside in this investment. That is just about as good as it gets on Wall Street!
~*~ This is one of those highly predictable trends that I base all my investments on. During the Y2K scare when we were approaching 12/31/1999, turning over to 1/1/2000, the gold did exactly what I have described above – rose and then fell. Lots of my subscribers made money on that one also.
~*~ Remember, there are other limitations and restrictions on options that I did not go into in this brief article that may affect your profits or the ability to buy the option at all. Don’t make investments based on this article - do your homework and read all the details so you fully understand what you are doing first. Any investment you make is entirely your own decision and I take no responsibility for how, when or why you make your investments nor do I guarantee any specific result.