I just watched a show in which scientists discussed things that could end or drastically change life of earth, listed in order from least likely to occur soon to most likely. These disasters were as follows:

1) A star explodes. Apparently, astronomers can see this happening someplace in the universe almost daily. However, the shock was that if one occurred in our Gallaxy (remember there are billions of Gallaxies), then the Earth would probably be destroyed fairly quickly.

2) A black hole approaches...when a star collapses it forms a black hole, sucking in everything around it. Scientists used to think these were stationary, but they are not. They move quite rapidly through space. And if one approaches Earth, we can all say goodbye. Fortunately, none of the known ones are approaching.

3) Super Intelligent Machines. You've seen stories about how Robots or Machines take over (e.g. the Terminator series comes to mind). Well, scientists now believe it is inevitable that machines we create will one day (next 100 years) be more intelligent than us. And when they reach that status, they could easily decide to wipe us out.

4) Super Volcano -- There is one in Yosemite. It blows about once every 600,000 years and when it does so it wipes everything out. That hasn't happend for 630,000 years, so its now due. Very few human beings on the planet would survive this.

5) Astroid -- They have discovered one that on April 13, 2029 will come so close to the earth that it will be inside the orbit of our communication satellites. Fortunately, it will miss the earth. However, there is a 0.1% chance that the earth's gravity will have enough influence on the astroid to change it's orbit slightly, meaning it would crash into the earth on April 13, 2036. And if it does it will cause mass extinctions.

6) Atomic disaster is the next most probable....and you all know about this one.

7) The next most likely is a Pandemic...10 of these have occurred in the past 300 years and they wipe out a lot of people. Let's see that works out to one every 30 years and we're way overdue. Pandemic flu is supposed to be the next one. However, the scientists think that one we make through our technology could be the real next disaster and dwarf anything made by nature.

8) The last one discussed is already happening -- global warming. We might be able to soften its impact by taking immediate action, but we cannot prevent it. In fact, CO2 levels are now higher than they have been in the last 600,000 years and there is a direct correlation between CO2 levels and the amount of global warming. In other words, CO2 levels are now higher than anything we can measure in the past (and some bad things have happened in the last 600,000 years climate wise). The best we can do is stop CO2 levels from rising more, but we cannot reduce the current level. But does our government (much less the world) do anything with an eye for future generations? Very little because they only care about what will impact the next election. Al Gore might have been an exception.

So what will happen with global warming? One sure thing that will happen (probably within the next 100 years) is that the ocean levels will rise 40 feet. That could easily put most of the world's major cities underwater -- Boston, New York, Philadelphia, Washington, Norfolk, Charleston, Miami, Tampa, New Orleans, San Diego, San Francisco, LA, Portland, Seattle, etc. (even Chicago because of Lake Michigan) -- just to name some major cities in the US. And those are just some of the lessor predictions of global warming. "The Day After Tomorrow" gives an example of "feedback loops" that might be triggered through global warming, but hopefully that's just someone's wild imagination.

Now I mention these disasters, not to scare you, because these events would all wipe out mankind (or nearly so). And they all will happen someday and there is nothing we can do. Just as it's pretty certain you'll die one day and there is nothing we can do. And one of them is happening right now, although the major impact of it might not be felt in our lifetimes -- just our children's lives. We cannot stop it although we may be able to ameliorate it. Yet most people don't even think about these things. And if there is nothing you can do, why worry? You are probably safe for at least the next 10-20 years. Thus, our government will probably implode from debt prior to a major impact from global warming. However, I would not want to be in the "insurance business" over the next 50 years. That means, for example, Warren Buffett, but he won't be around 50 years from now either.

So what's the Point of All of This?

Price shocks in the market place, where prices over a wide variety of stocks, futures, forex, etc move 10% or more within a day or so are much more likely than anything discussed above. These could wipe out many people financialy. Yet most people trade like these have no chance to occur at all. There have been two major ones since I've been a trading coach -- September 11, 2001 and Black Monday (October 1987). That amounts to a 13 year average between price shocks. By the way, if anyone has a list of major price shocks over the last 200 years, I'd be interested. These have to be one's that have had a major influence on the markets -- like a 10% change in the market within a few days or overnight.

So what's the next one and how will it affect you? I have no idea. They are not that predictable except to say they will occur. What you really need to do is make sure that when the next one occurs that it doesn't wipe you out, especially if you play a highly leveraged trading game. This means watching your portfolio heat and doing some worse case disaster planning. Consider the following:

Carefully, consider the impact of price shocks in your position sizing.

Develop a business plan and do a worst case contingency plan as part of it. We have material at our web site to help you here, such as the business planning CDs.