Investing in Crime?

A question from Yahoo! Answers:

What would you invest in if you thought the crime rate across the nation in the next 3-5 years would spike?

Define “crime” (crime against persons, crime against property, white-collar crime?) and “spike” (10% increase, 100% increase, 1000% increase?).

A substantial increase in property crime (more specifically, arson, auto theft, burglary, property destruction, and insurance fraud), for example, would drive down profits of insurance companies; their stocks would be adversely affected, so you could invest in put options on those stocks or simply short those stocks.

Generally speaking, crime is a net cost to society (most of the cost being intangible), so a substantial increase in crime would put a downward pressure on asset prices. So any “crime-based” investment strategy should have a substantial shorting component…

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