2008 was a terrible time for the stock market with Lehman Brothers failing, we saw the SPY/DOW go into free dive. But how does someone make money in long positions during these circumstances? The key I found is to invest into pharmaceutical companies, specifically ones which manufacture prescription anti-depressants. If we assume that the economy is reflective of our collective psychology, surely a large drop in the SPY would trigger collectively lower moods. A recent study by the Organization of Economic Co-operation and Development have found that the financial meltdown was a huge trigger in the increase of prescription anti-depressants. (http://rt.com/news/antidepressant-use-economic-crisis-068/)
Lets see what the data shows:
- Spain with an unemployment rate 26.6% has seen antidepressant prescriptions rise by 23% in the last 5 years
- Iceland, who was one of the hardest hit during the eurozone crisis, has seen its prescription rate rise to 105.8 doses per day within 1000 individuals. Given that most antidepressants are sustained release, that's close to 10% of all of Iceland are on antidepressants
Putting this data into play we look at a common generic company TEVA Pharmaceutical Industries (NYSE:TEVA)
We can clearly see that TEVA moves anti-parallel to the DOW Jones index, this is most noticeable during 2008.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.