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Investment Options for 'Fiscal Cliff' Bears

I wouldn't be surprised if this makes Chesapeake Energy (CHK) worthless, as natural gas can't be exported as oil can. Gas is already selling at near its production costs.

Sell Canada: Falling oil prices benefit suppliers of lower cost reserves. So a U.S. recession is very, very bad for Canadian tar sands. I might even short the Canadian iShares ETF (EWC) as a speculation, given the leverage that economy has to the sands and the political turmoil that will result from falling demand for what it supplies. If we go over the cliff, and especially if oil prices decline as a result, we're taking Canada with us.

Mining.com wrote recently that tar sands producers were already getting the equivalent of just $45/barrel for their production . Britain's The Independent estimates it costs $80 to $100 a barrel to break even on tar sand production .

During the 2008 financial crisis, a lot of tar sands projects were shelved as global oil prices fell. This is starting to happen again. The profit squeeze is hitting companies like Suncor (SU), Cenovus (CVE) and Imperial Oil (IMO), and that reduction in supply is hurting the big pipeline companies, like TransCanada (TRP) and Kinder Morgan (KMI), both of which are already facing environmental delays in getting projects approved.

Buy Dollars: The "Fiscal Cliff" deal was always about deficit reduction. There's talk about the fight moving to the debt ceiling, if no comprehensive agreement is reached here, but the Constitution is pretty clear that the debts run up by Congress must be paid. If our government's books are coming closer to balance, by any means, this is good for the U.S. currency and for assets denominated in U.S. currency.

Most analysts have assumed that interest rates are heading up this year, as economic growth accelerates. But if government austerity turns growth negative, you're also going to get the old "flight to quality." If we do go over the cliff, in other words, bondholders may be in for a pleasant surprise.

Of course, I still expect that none of these things will happen. A deal will probably get done. This column will probably go into the "April Fool" category.

But in case I'm wrong, you're wrong and we're wrong, clip it and save.

At the time of publication, the author was long GE.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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