Nothing is more certain than uncertainty

Jerry Haworth, co-founder of hedge fund manager 36 South, pitched into the debate last week with the launch of a new product dubbed Excelsior. The fund pledges to protect investors against the ravages of possible inflation by giving them an exposure to out-of-the-money call options on a range of investments, including commodities.

If the deflationists triumph and global inflation fails to rise beyond 5% over five years, punters will lose their money but console themselves with the thought that their wealth has not been inflated away. If, however, the inflationists come out to play and price rises go beyond 5%, investors can expect to quintuple their money. It is quite possible that the mere fear of inflation, at one point or another, will be sufficient to help the options soar upwards.

Haworth adds that it is possible inflation will hit some asset classes, notably commodities, without making any impact on others, such as financial assets. This syndrome is supported by the stagflationists, who are not generally allowed out during the day because they scare people so much.

http://www.wealth-bulletin.com/rich-life/content/1054330752/

at 6/03/2009 Labels: ,

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