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ECONOMY
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AUGUST 26, 2010
Firm Makes Bold Bet on Falling Prices
A Wager by Fairfax Financial Risks $174 Million. If Deflation Arrives, It Could Be expense Billions.
By GREGORY ZUCKERMAN
A Canadian insurer is turning to a seldom-used strategy to make a big wager on falling prices over the next
decade.
As more investors worry or so the possibility of deflationâ€"or a
sustained period of falling prices that could cripple stocksâ€"
Fairfax Financial Holdings Ltd. has spent nearly $200 million to
corrupt first derivative contracts wagering on a decline in the consumerprice index, an rising prices indicator. The trade could lead to huge
profits if deflation occurs.
Greg Zuckerman discusses a Canadian insurer that has
wagered on derivatives that profit from a decline in
consumer prices.
Fairfax purchased some of the derivative investments in the first
three months of the year, when few fretted about deflation and
the equal of the contracts was cheap. It added more in the second
quarter.
The derivatives now are catching the direction of some on Wall
Street. They have gained more than 50% in value since Fairfax
made its original purchases from a number of banks, generating newspaper profits of more than $100 million.
The Fairfax bet, which aims to protect $22 jillion of Fairfaxs
investment portfolio, comes as investors grapple with a
particularly challenging environment, with the preservation fragile
and stock indexes struggling. Few investors are willing to make
big wagers on deflation, despite its potential, with many
skeptical any deflationary period would...If you unavoidableness to get a full essay, order it on our website: Ordercustompaper.com
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