Investment Options for 'Fiscal Cliff' Bears

NEW YORK ( TheStreet) -- I've been willing to buy the conventional wisdom that some deal will be done to avert the "Fiscal Cliff." I even think it's an opportunity to get some great companies cheap .

As this was written on New Year's Eve, we still had no deal. But even if Congress treats the Jan. 1 deadline like the late Douglas Adams -- he said "I love deadlines. I like the whooshing sound they make as they fly by" -- a deal can still get done later this week, even next week, with minimal harm.

Yes, there will be a lot of uncertainty, and accountants will be churning out overtime. A final deal, reached this coming Friday, would doubtless hold taxpayers harmless for the complications. And everything in it would be a tax cut, while in 2012 Republicans are being told to vote for tax raises. It makes a difference.

I've told you what bulls should do in the event of a cliff disaster. But what should bears do, other than take Bette Davis' advice of "Fasten your seat belts, it's going to be a bumpy night."

Here are my thoughts, and I'd love to hear yours:

Sell Defense Stocks: The least-mentioned provision in the 2011 deal creating the cliff is a 9% cut in the defense budget, starting tomorrow. Health care for soldiers would be cut, and Lockheed-Martin ( LMT) is talking of an immediate layoff of 10,000 workers, according to Bloomberg.

Other big contractors like Boeing ( BA), Northrup Grumman ( NOC) and General Dynamics ( GD) also get downgraded in this case.

So would companies you don't always associate with defense, like Honeywell ( HD) and General Electric ( GE). Business Insider has a list of the 25 largest military contractors, all available for shorting.

Sell Oil and Gas: If the U.S. goes into recession it's going to hurt the price of oil, since we're the largest energy user. Unfortunately that's going to hurt a lot of U.S. companies since we're becoming one of the largest producers again. This is going to be bad news for integrated oils like Exxon Mobil ( XOM), Chevron ( CVX) and BP ( BP), but big U.S.-based oil production outfits like Anadarko ( APC) and Devon ( DVN) are still going to sell what they produce, albeit at lower prices.

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